China’s exports shrink most in two years, raising risks for global economy

China’s total global exports rose 9.9 percent in 2018, its strongest trade performance in seven years. (AFP)
Updated 14 January 2019

China’s exports shrink most in two years, raising risks for global economy

  • China posted its biggest trade surplus with the United States on record in 2018
  • Many US warehouses are already packed to the rafters with Chinese goods that American retailers rushed in ahead of higher tariffs

BEIJING: China’s exports unexpectedly fell the most in two years in December and imports also contracted, pointing to further weakness in the world’s second-largest economy in 2019 and deteriorating global demand.
Adding to policymakers’ worries, data on Monday also showed China posted its biggest trade surplus with the United States on record in 2018, which could prompt President Donald Trump to turn up the heat on Beijing in their cantankerous trade dispute.
Softening demand in China is already being felt around the world, with slowing sales of goods ranging from iPhones to automobiles prompting profit warnings from the likes of Apple and Jaguar Land Rover.
The dismal December trade readings suggest China’s economy may have lost more momentum late in the year than earlier thought, despite a slew of growth boosting measures in recent months ranging from higher infrastructure spending to tax cuts.
Some analysts had already speculated that Beijing may have to speed up and intensify its policy easing and stimulus measures this year after factory activity shrank in December.
Exports in December unexpectedly fell 4.4 percent from a year earlier, with demand in most of its major markets weakening. Imports also saw a shock drop, falling 7.6 percent in their biggest decline since July 2016.
“Export growth dropped more than anticipated as global growth softened and the drag from US tariffs intensified. Import growth also fell sharply in the face of cooling domestic demand. We expect both to remain weak in the coming quarters,” Capital Economics said in a note.
“Meanwhile, with policy easing unlikely to put a floor beneath domestic economic activity until the second half of this year, import growth is likely to remain subdued.”
China’s politically-sensitive surplus with the US rose 17.2 percent to $323.32 billion last year, the highest on record going back to 2006, according to Reuters calculations based on customs data.
That compared with about $275.81 billion in 2017.
China’s large trade surplus with the United States has long been a sore point with Washington, which has demanded Beijing should take steps to reduce it.
Washington imposed import tariffs on hundreds of billions of dollars of Chinese goods last year and has threatened further action if Beijing does not change its practices on issues ranging from industrial subsidies to intellectual property. China has retaliated with tariffs of its own.
However, Beijing’s export data had been surprisingly resilient to tariffs for much of 2018, possibly because companies ramped up shipments before broader and stiffer US duties went into effect.
China’s total global exports rose 9.9 percent in 2018, its strongest trade performance in seven years, while imports increased 15.8 percent last year.
But December’s gloomy data seemed to suggest the US front-loading effect has tapered off, and after several months of falling factory orders a further weakening in China’s exports is widely expected in coming months.
Many US warehouses are already packed to the rafters with Chinese goods that American retailers rushed in ahead of higher tariffs.
China exports to the US declined 3.5 percent in December while its imports from the US were down 35.8 percent for the month.
The higher tariffs China levied on US supplies also hit the country’s overall import growth. For all of 2018, soybean, the second largest imports from the US, fell for the first time since 2011.
Even if Washington and Beijing reach a trade deal in their current round of talks, it would be no panacea for China’s slowing economy, analysts say.
Sources told Reuters last week that Beijing is planning to lower its economic growth target to 6-6.5 percent this year after an expected 6.6 percent in 2018, the slowest pace in 28 years.


White House says Trump regrets not raising tariffs higher

US President Donald Trump arrives at the G7 summit in Biarritz, France, on Sunday. Trump had been trying to use the conference to rally global leaders to do more to stimulate their economies, as fears rise of a potential slowdown in the US ahead of his reelection. (AP)
Updated 11 min 54 sec ago

White House says Trump regrets not raising tariffs higher

  • President’s comments appear at first to mark a rare moment of self-reflection by the US leader

TOKYO: President Donald Trump said Sunday that he had second thoughts about escalating the trade war with China, but the White House later reversed that message saying the president was misinterpreted and that his only regret in hiking tariffs is that he didn’t raise them higher. Trump faced a tense reception from world leaders meeting amid mounting anxiety of a global economic slowdown at the Group of Seven summit in France. During a breakfast meeting with British Prime Minister Boris Johnson, Trump suggested he had qualms about the spiraling conflict. “Yeah. For sure,” Trump told reporters when asked if he has second thoughts about escalating the dispute, adding he has “second thoughts about everything.”
But hours later, White House press secretary Stephanie Grisham issued a statement saying Trump’s comments about US tariffs on China were “greatly misinterpreted.”
She said Trump only responded “in the affirmative — because he regrets not raising the tariffs higher.” The comments appeared at first to mark a rare moment of self-reflection by the famously hard-nosed leader. But the later reversal fit a pattern for Trump in recoiling from statements he believes suggest weakness.

HIGHLIGHTS

• President Donald Trump faced a tense reception from world leaders meeting amid mounting anxiety of a global economic slowdown at the Group of Seven summit in France.

• White House said comments about US tariffs on China were ‘greatly misinterpreted.’

Trump had been trying to use the conference to rally global leaders to do more to stimulate their economies, as fears rise of a potential slowdown in the US ahead of his reelection. Trump’s counterparts, including Johnson, are trying to convince him to back off his trade wars with China and other countries, which they see as contributing to the economic weakening.

US-Japan agreement
Trump and Japan’s Prime Minister Shinzo Abe announced on Sunday a deal in principle on a major bilateral trade deal.
“It’s a very big transaction,” Trump said after talks with Abe on the sidelines of the G7 summit.
“Billions and billions of dollars,” he said. “It involves agriculture, it involves e-commerce. It involves many things. We’ve agreed in principle.”

Amazon fires
Also on Sunday, French President Emmanuel Macron said that world leaders at the G7 summit have agreed to help the countries affected by the huge wildfires ravaging the Amazon rainforest as soon as possible.
“We are all agreed on helping those countries which have been hit by the fires as fast as possible,” he told journalists.