In August, China’s export growth suffered its biggest one-month blow. It was up only 4.4% in U.S. dollar terms from the same month a year earlier. That represents the slowest growth rate since February. It’s beneath economists’ expectations, who had called for a 5.0% year-over-year increase, according to a recent Reuters survey. The deceleration in export growth is historic. It’s a pretty sharp contrast from the same time last year, when exports grew at their highest rate in almost 18 months.
A combination of factors help explain the slowdown in China’s exports. First, today’s growth is heavily influenced by the statistical effect of a high base from last year. Whether it has been because businesses that previously sought to evade higher U.S. tariffs by front-loading their activity have backed off. This loss of momentum has contributed to the downturn in export numbers. This pattern highlights the continued, unfortunate reality for many Chinese exporters during the see-sawing trade policies.
Third, China’s exports have collapsed. Imports were able to grow, albeit modestly at 1.3% last month over the same time last year. This growth figure was a disappointment, coming in below expectations with analysts predicting a 3% increase. Despite this, it represents the third month in a row of import increases since coming back to the positive side in June. Certainly, the bigger story is overall performance remains tepid. The increase is mostly attributed to a continuing downturn in the housing market and increasing consumer fear over the loss of jobs.
Our trade world is changing at lightning speed. As we noted before, on August 11th, Beijing and Washington reached a deal to further their trade war ceasefire for an additional 90 days. Today, U.S. tariffs on Chinese imports are seen to be about 55%, while Chinese tariffs on U.S. exports are around 30%. These tit-for-tat tariffs are wreaking havoc on the ag trade relationship between both countries. They further contribute to the regulatory whiplash that private industry suffers from.