The two largest global economies reached an agreement last month to maintain a pause in the trade war, allowing negotiations to continue. This temporarily set U.S. tariffs on Chinese goods at 30%, while Chinese tariffs on U.S. imports remain at 10%.
Despite this uncertain context, Chinese exports saw a year-on-year increase in July (+7.2%), surpassing the forecast by economists consulted, who expected a rise of 5.6%.
Imports also rose by 4.1% compared to the same month last year, contrary to expectations of a contraction.
The truce between Beijing and Washington is due to end on Tuesday, at which point tariffs could return to higher levels. There remains doubt about the two powers’ ability to reach a more lasting agreement.
U.S. Trade Representative Jamieson Greer stated at the end of July, following the last round of negotiations in Stockholm, that U.S. leader Donald Trump would have the “final say” on any extension of this truce.
Trump welcomed the introduction, on Thursday, of new tariffs affecting dozens of trade partners, including a 35% tariff on Canada.
Washington has tied the continuation of negotiations with Beijing to the supply of rare earths by China, following the Asian country’s export restrictions on these materials essential for the energy, electronics, and arms industries.
Encouragingly, Chinese customs data published on Thursday indicated that rare earth shipments remained solid in July, despite a slight decrease after a peak in June.
The absence of an agreement between the two powers could heavily impact the trade of the world’s second-largest economy.
Although Chinese exports have been driven by the creation of product reserves due to fears of new tariffs, sales to the United States fell by 6.1% between June and July, according to Chinese customs.
The growth of Chinese exports “may slow down in the coming months, as the advance stockpiling to avoid American tariffs ends,” anticipated Zhiwei Zhang, chief economist at Pinpoint Asset Management.
Chinese exports could also be affected by new U.S. tariffs on products attempting to bypass tariffs through third countries.
“The big question is to what extent Chinese exports will slow down and how this will impact the rest of the economy,” observed Zhiwei Zhang.
The Chinese Communist Party has set an ambitious target of “about 5%” GDP growth by 2025.
Besides the trade war, the Asian country also faces a prolonged real estate crisis affecting consumer morale and local government finances.
The growth in imports in July “may reflect stockpiling of certain raw materials, rather than a broader recovery of domestic demand,” noted Zichun Huang, an economist at Capital Economics.
Data published last week indicated a sharper-than-expected decline in industrial production, a sign of persistent difficulties.
