China’s export growth decelerated in August, reflecting the impact of escalating trade tensions and U.S. tariffs.
According to customs data, exports rose by 4.4% year-on-year to $321.8 billion, a significant slowdown from July’s 7.2% increase and below the 5.0% forecast by Reuters-polled economists.
Imports grew by a modest 1.3%, totaling $219.5 billion, missing expectations of a 3% rise.
This sluggish performance underscores challenges in both global and domestic demand, with China’s trade surplus widening to $102.3 billion.
The U.S. remains China’s largest single-country trading partner, absorbing $283 billion in goods through August, but bilateral trade faced severe pressure.
Chinese exports to the U.S. plummeted 33% in August to $47.3 billion, while imports from the U.S. fell 16% to $13.4 billion.
President Donald Trump’s 30% tariffs on Chinese imports, coupled with a 40% tariff on transshipped goods, have squeezed exporters.
A temporary 90-day tariff truce extended on August 11 provided little relief, as talks falter, with a recent visit by Chinese trade negotiator Li Chenggang to Washington yielding minimal progress.
China’s rare earth exports, critical for products like cars and fighter jets, rose to $55 million in August from $41 million in July, though they dropped 25.6% year-on-year.
A prior clampdown in April disrupted global supply chains, but China eased restrictions after June trade talks, agreeing to increase export permits in exchange for U.S. concessions on chip design software and jet engines.
Meanwhile, Chinese exporters pivoted to alternative markets, with shipments to the EU, ASEAN, and Africa surging by 10.4%, 22.5%, and nearly 26%, respectively.
However, these markets cannot fully offset the U.S. market’s scale.
Weak domestic demand, evidenced by a 1.3% import growth and a persistent real estate slump, continues to strain China’s economy.
Deflationary pressures are expected to persist, with Goldman Sachs forecasting a 2.9% drop in the producer price index for August.
Economists, including Zichun Huang of Capital Economics, warn that fading truce benefits and tightened transshipment rules will challenge exports further.
Beijing may consider fiscal stimulus or a rate cut, with Neo Wang of Evercore ISI predicting a 10-20 basis point reduction next week to counter subdued economic data.