The effects of US president Donald Trump’s tariffs on China’s trade are beginning to filter through in the numbers, as new analysis shows a fall in the country’s exports to the US.
Stats published by the FT this morning suggest that exports from China to the US declined by 34% compared with the same time last year, marking the fastest drop since early 2020 in the first phase of the Covid-19 pandemic.
Despite this, however, overall Chinese exports continued to grow, increasing by 4.8% year-on-year. Imports to China fell by 18.1%, meanwhile, in May. Its overall trade surplus grew to US$103.22bn from $96.18bn in April.
Talks begin
The two countries will send representatives to London today as they engage in their latest round of talks after the agreement of a delicate tariff truce on 12 May – one that has been tested in recent weeks by mutual accusations of noncompliance with its provisions. The US’ accusations that China has tightened its control of the rare earth supply chain echoes frustrations of those in European industry that China is delaying approvals for their export.
Both domestic Chinese consumer and producer prices declined in May too, the latter at their fastest rate since 2023. This, suggested economists at Nomura, could be a result of exporters competing on price to secure orders. The fall in China’s imports of oil, iron and coal could also indicate weakening domestic demand.
ING chief China economist Lynn Song said that “it’s likely that the May data continued to be weighed down by the peak tariff period,” adding that “we expect that export growth to the US could recover in the coming months”. She noted that China is making up some of the shortfall with exports elsewhere, helping it to maintain that overall rate of growth. She added that frontloading of shipments was ongoing as a result of US tariff risks.
‘Very positive’ possibilities?
Trump said following his call with Chinese president Xi Jinping that they had come to a “very positive conclusion for both countries”. But what will that mean in practice as talks get underway in London?
The seniority of those in the delegation may give us some indication. On the US side, commerce secretary Howard Lutnick will be in attendance, while China’s vice premier, He Lifeng, will also be there.
Xi is reported to have told Trump to "withdraw the negative measures it has taken against China" during their call, though whether this is likely to happen is unclear.
Artemis fund manager Swetha Ramachandran told the BBC that China’s dominance in the rare earth supply chain gives it leverage in the talks:
"They mine 69% of the rare earths globally that are quite essential to technology development in the US so I think there are enough chips on the table here that could make it acceptable for both sides to walk away with desired outcomes."
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