China imports jump, exports robust in July as trade war yet to take toll

By BLOOMBERG

BEIJING • China’s exports grew faster than expected, while imports surged, showing both domestic and international demand continue to shrug off the uncertainty of the trade conflict with the US.

Exports rose 12.2% in July in dollar terms from a year earlier, the customs administration said yesterday, faster than the forecast 10%. Imports climbed 27.3%, leaving a trade surplus of US$28 billion (RM113.96 billion).

As the world’s largest exporter, China is still benefitting from robust global demand, but increasing tensions and rising trade barriers with the US are weighing on the outlook.

Although most of the threatened tariffs still haven’t gone into effect yet, the two remain locked in an escalating tit-for-tat exchange of threats, signalling worse is to come.

“The higher than expected imports were pushed up by energy prices, which narrowed the trade balance,” said Iris Pang, Greater China economist at ING Wholesale Banking in Hong Kong. “The impact of tariffs on exports is yet to be reflected. We will see a full month tariff effect in August.”

The Chinese government last week announced its list of US$60 billion worth of US goods it will hit with higher import taxes should the US follow through on a plan to impose duties on an additional US$200 billion of Chinese goods. That follows a previous round, where each side imposes tariffs on US$34 billion of imports, with promises of US$16 billion more.

The pickup in exports points to limited initial impact of the trade war so far, with strong global demand supporting shipments.

“Looking forward though, the outlook for China’s exports is grim in view of the escalating trade war. Our view is that exports will become a drag on growth” and policy support will be stepped up, according to Bloomberg Economics.

In the meantime, China’s economy is showing signs of weakness — the yuan has been on a losing streak for more than a month, the equity market has suffered declines and other early indicators are pointing to a slowdown. The central bank has made it more expensive to bet against the yuan in a bid to ease pressure on the currency.

China’s exports to the US in July rose to US$41.5 billion, making up 19.3% of its total shipments.

The trade surplus with the US stood at US$28.1 billion, close to the record-high in June, according to Bloomberg calculations.

Imports volume of coal, oil, iron ore and natural gas all increased in July. Imports from Australia, Russia, South Korea and Japan all surged last month.