Published: Sun, July 15, 2018
Finance | By Jaime Brady

China's trade surplus with USA swells in June

China's trade surplus with USA swells in June

While China has vowed to retaliate against the proposed new US tariffs - 10 percent on $200 billion of Chinese goods - the lack of a specific response to date has sparked global relief.

"Looking ahead, export growth will cool in the coming months as U.S. tariffs start to bite alongside a broader softening in global demand", Capital Economics analyst Julian Evans-Pritchard said in a statement.

Earlier this week Donald Trump proposed a 10% tariff on $200bn of Chinese goods entering the U.S., saying that tariffs already in place on steel and aluminium imports and $34bn of goods had failed to force significant reforms by Beijing.

"We expect the trade numbers for July to disappoint since that's when the first round of United States tariffs took effect", China analyst at Nordea Bank in Singapore Amy Zhuang told the BBC. China also said both its imports and exports with the U.S. rose in the first half of 2018. Imports expanded by 14.1 per cent to $175.1 billion, down from the previous month's 26 per cent. Its trade surplus with the USA over the same period was $133.76bn, up from $117.51bn a year ago.

While China continues to benefit from strong global demand for its goods for now, the rising trade tensions with the U.S. has the potential to hurt both sides.

Trump has railed against China's trade surplus with the USA, which ran at $375 billion in 2017, and has demanded Beijing cut it. Washington has warned it may ultimately impose tariffs on more than $500 billion worth of Chinese goods - roughly the total amount of United States imports from China previous year.

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Amy Zhuang has warned that there could be knock-on effects if the U.S. proceeds with its proposal for a new round of tariffs on $200bn of Chinese goods.

David Kuo, chief executive of the Motley Fool Singapore, said "US tariffs will increase the cost of Chinese imports but they are unlikely to deter United States consumers entirely".

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

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.

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

In a sign Beijing is seeking alternative supplies of the commodities as it hit USA imports with extra tariffs, China had dropped import tariffs on a range of animal feed ingredients from several Asian countries.

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