Published: Sat, July 14, 2018
Markets | By Noel Gibbs

China trade surplus with U.S. hits historic high & timing couldn’t be worse

China trade surplus with U.S. hits historic high & timing couldn’t be worse

China's surplus with the U.S. swelled in June, data showed on Friday, likely stoking tensions with Donald Trump, who has imposed tariffs on billions of dollars of Chinese goods citing unfair trade practices.

Over the first six months of the year the surplus climbed to $133.8 billion as total two-way trade continued to expand despite the face-off.

The data comes as President Trump has ratcheted up a trade war with China and other close American trade partners, including Canada, Mexico and the European Union.

Donald Trump had recently upped the ante by threatening higher tariffs on a colossal $200 billion of Chinese imports.

Analysts also pointed out that Chinese export growth slowed to 11.3% year on year in June, from 12.2% in May, illustrating that exporters, faced with the threat of further trade barriers, were becoming more circumspect in sending goods overseas.

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Last Friday, Trump rolled out 25% tariffs on $34 billion of Chinese goods.

China's June exports rose 11.3 percent from a year earlier, beating forecasts for a 10 percent increase according to the latest Reuters poll of 39 analysts, and down from a 12.6 percent gain in May. China said the two sides were not discussing restarting trade negotiations.

China's commerce ministry confirmed last month that Chinese exporters were front-loading exports to the USA to get ahead of expected tariffs - a situation that could exacerbate any slowdown in shipments toward the year end.

However, a lower yuan would make it more expensive for China to import USA goods.

China's foreign trade faces risks of slowing in the second half of the year, General Administration of Customs spokesman Huang Songping told a news conference - a view backed by analysts and likely to put more strain on an economy already feeling the pinch from a multi-year debt battle that has driven up corporate borrowing costs.

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But, he said, China has another option - Beijing could reduce the impact of U.S. tariffs on exporters by devaluing the yuan to make its goods cheaper for American consumers.

Mnuchin also said that the renegotiation of the North American Free Trade Agreement was a big priority for the administration now that Mexico's recent presidential election had passed.

The spiraling battle between Beijing and Washington shows no signs of cooling down.

In the first half of the year, Chinese exports to the USA increased 13.6 percent as compared to the same period in 2017, while imports from the US only rose 11.8 percent.

Growth in imports for June showed a moderate slowdown from May, official data showed on Friday.

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Analysts expect to see the impact of the tariffs in July's figures.

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