China’s exports unexpectedly contracted in August, with sales to the US tumbling amid the escalating trade war between the two countries.
Exports decreased 1% in dollar terms from a year earlier, while imports declined 5.6%, leaving a trade surplus of $34.8 billion, the customs administration said on Sunday. Economists had forecast that exports would grow 2.2%, while imports would shrink by 6.4%. Shipments to the US fell 16% from a year earlier.
US President Donald Trump’s administration raised tariffs on Chinese goods at the start of the month, and is set to ratchet up levies further in October and again in December if there is no breakthrough. China and the US will hold face-to-face trade negotiations in Washington in the coming weeks, after a rapid deterioration in relations last month left global investors reeling amid increasing evidence the conflict is harming both countries.
“It’s bad on all fronts,” said Michael every, head of Asia financial markets research at Rabobank in Hong Kong. “Add in the inevitable fall-off when US shipments finally catch up with 15% and 30% tariffs, and it’s an ugly picture.”
Weak exports add pressure on China’s already-slowing economy and point to an increased need for its policymakers to beef up stimulus measures. The central bank said on Friday it will cut the amount of cash banks must hold as reserves to the lowest level since 2007, injecting liquidity into the economy with the goal of stimulating demand.
“The optimism from easing policies announced on Friday may be partially offset by the weak trade data as the economy still faces larger downward pressures,” said Peiqian Liu, a China economist at NatWest Markets in Singapore. She sees the yuan between 7.05 and 7.25 per dollar in the near term.
China’s August trade surplus against the US was $26.9 billion.
