China experienced a decline in exports during October, marking the first decrease in eight months, according to official data released on Friday. The drop of 1.1 percent year-on-year came as a surprise, failing to meet the 2.9 percent increase forecasted by Bloomberg. On the other hand, imports in the same month increased by 1.0 percent, as reported by China’s General Administration of Customs. However, this growth was lower than the previous month and fell short of the 2.7 percent projection by Bloomberg.
The trade tensions escalated before the meeting between Chinese President Xi Jinping and US counterpart Donald Trump in South Korea, following which the two countries reached a temporary truce in their trade war. This agreement led to the suspension of various measures for a year, easing the back-and-forth trade actions between the two economic giants.
In response to China imposing restrictions on the export of rare earth technologies, a sector crucial for defense and auto industries and dominated by China, President Trump threatened a 100 percent tariff increase on Chinese goods. Nevertheless, this threat was withdrawn after the meeting in South Korea, with Trump labeling the encounter as a success. Subsequently, Washington reduced the blanket tariff on Chinese goods to 10 percent, while Beijing relaxed restrictions on rare earth exports, benefiting European businesses as well.
Furthermore, China removed additional tariffs on US agricultural products like soybeans, which are vital for American farmers, a significant part of Trump’s support base. The customs data revealed a decline of 11.6 percent in China’s imports from the United States in October, while exports to the US increased by 1.8 percent.
Economist Zhiwei Zhang from Pinpoint Asset Management noted that Chinese exporters had been accelerating their trade activities to avoid high US tariffs. This was evident in the 8.6 percent surge in shipments to the US in September compared to August, following a decline in the previous month. Zhang suggested that with the trade war on hold, exports were likely to stabilize, but he cautioned that China must now focus more on domestic demand as export momentum wanes.