China exports beat forecasts ahead of US tariff talks

Chinese exports posted an unexpected rise in April despite escalating trade tensions with the United States, official data released Friday, May 9, showed. The 8.1 percent year-on-year increase far exceeded the 2 percent growth forecast by analysts, suggesting that Beijing may be re-routing its trade flows to mitigate the impact of US tariffs. The trade data, published by Chinas customs bureau, revealed significant increases in exports to Southeast Asian countries such as Thailand, Indonesia, and Vietnam, while exports to the US dropped sharply by 17.6 percent month-on-month. Analysts say the trend reflects a strategic shift in trade routes as China seeks to soften the blow of tariffs as high as 145 percent imposed by the Trump administration. In response, China has introduced tariffs of up to 125 percent on US goods, further deepening the standoff between the worlds two largest economies. Stephen Innes of SPI Asset Management described the shift as a structural repositioning of global supply chains. The global supply chain is being rerouted in real time, he said. Vietnam looks set to become Chinas offshore escape hatch for US-facing goods. The manufacturing juggernaut is diverting flow wherever the tariff pain isnt. Despite the trade war, analysts at ANZ Research said Chinas central role in global manufacturing means it remains difficult to exclude the country from supply chains. The implied supply chain realignment as well as the expected outcome of Asia-US trade talks suggests no imminent collapse in China exports, they noted. The trade data was released ahead of a key meeting in Geneva between US and Chinese officials, the first formal dialogue since President Donald Trump launched his tariff offensive in a bid to bring manufacturing jobs back to the United States. While Washington hopes the discussions will lead to a de-escalation, Beijing has stated it will firmly defend its interests. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, attributed the stronger-than-expected export figures partly to transshipment through other countries and to trade contracts signed before the latest round of tariffs were announced. I expect trade data will weaken in the next few months, he warned. On the import side, China reported a slight decline of 0.2 percent, defying expectations of a 6 percent fall. The modest drop is seen as an indicator of persistent weakness in domestic consumer demand. In response, Chinese policymakers have rolled out a series of monetary easing measures aimed at stimulating the economy. These include interest rate cuts and reduced reserve requirements for banks to encourage lending. Efforts to revive the struggling property sector, a major pillar of the Chinese economy, were also intensified. The central bank announced a reduction in the mortgage rate for first-time homebuyers with loan terms over five years to 2.6 percent, down from 2.85 percent, the most significant policy move of its kind since September. However, some economists caution that the policy measures may not be sufficient. Gary Ng, senior economist for Asia Pacific at Natixis, said that while tariffs could potentially be adjusted depending on the outcome of trade talks, the uncertainty surrounding the US-China relationship continues to pose a challenge. Even if the tariffs may be trimmed depending on the outcome of US-China trade talks, the persisting uncertainties will continue to accelerate decoupling structurally, he said.The post China exports beat forecasts ahead of US tariff talks appeared first on Linda Ikeji Blog.