Donald Trump's trade war hits Chinese exports

Posted January 16, 2019

"But growth in exports to the rest of the world also slowed significantly, indicating that softer demand was the main culprit, and that a trade truce with the US would be no guarantee of a strong recovery".

China's exports to the world fell 4.4% in December from a year earlier, while imports dropped 7.6%, reflecting sluggish demand at home and overseas.

The deceleration of exports adds to pressure on Beijing to resolve its costly tariff battle with Washington over Chinese technology ambitions.

Officials of China and US held three day talks last week to clinch a deal by March 1, the end of deadline set by US President Donald Trump, who is demanding that China should come up with credible initiatives to reduce the United States dollars 375 billion trade deficit in 2017. But forecasters said American orders would slump once the full impact of Trump's penalties hit.

"The external environment is still complicated and severe", customs agency spokesman Li Kuiwen told reporters on Monday.

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The dismal December trade readings suggest China's economy may have cooled faster than expected late in the year, despite a slew of growth-boosting measures in recent months ranging from higher infrastructure spending to tax cuts.

Li cited dangers including "protectionism and unilateralism" - a reference to Trump's import controls - a possible slowdown in global economic growth and a decline in cross-border investment. Chinese commerce ministry has said that the goal of these talks which will be held on 7 and 8 January will help both nations implement a critical consensus. Imports also saw a shock drop, falling 7.6 percent in their biggest decline since July 2016.

Private enterprises played a bigger role, accounting for 39.7 percent of the total foreign trade, up 1.1 percentage points compared with 2017.

While the Chinese economy remained surprisingly resilient to these tariffs over the course of 2018, it appears the restrictions finally began to bite in December, driving USA exports down 3.5 percent and imports down a whopping 35.8 percent.

Trump and his Chinese counterpart, Xi Jinping, agreed on December 1 to postpone additional tariff hikes by 90 days while they negotiated. Both nations have imposed tariffs worth more than $300 billion and this is the first time that they are sitting down for a formal discussion to end the stalemate after their leaders agreed not to impose any more tariffs for 90 days at the G20 summit previous year.

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Trade with countries along the Belt and Road registered faster-than-average growth, with the trade volume standing at 8.37 trillion yuan, up 13.3 percent year on year.

China's trade surplus with the USA widened past year, while the country's imports and exports fell in December as the trade war begins to bite in the world's second biggest economy.

Still, Louis Kuijs of Oxford Economics says he expects Washington to extend its 90-day deadline following the "positive vibes" of last week's talks.

"I think that we are going to be able to do a deal with China".

"We do not see the USA fully removing the specter of tariff hikes any time soon", he said in a report.

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