China’s trade figures for May gives us another piece of evidence that should make us very concerned. Exports to the United States have plummeted even further—34.5% from a year ago. This steep drop follows a decrease of more than 21% in April. It certainly points to a major escalation in the ongoing trade war between the two economic superstars. Now, trade tensions are adding fuel to the fire. U.S. imports have fallen by more than 18%.
China’s Ministry of Commerce expressed its discontent with the recent U.S. actions. They are especially harsh on the new Chinese student visa restrictions and to the recent pent-up excess export restrictions on necessary technologies, such as semiconductors. These actions have received sharp criticism from Beijing, who see these steps as damaging to building amicable trade relations.
In May, China’s total export growth came in below expectations. In U.S. dollar terms, it slowed even further to a meager 4.8% vs. last year’s same month. This slowdown is a far cry from April’s historic 8.1% splash. Further, imports into China plunged by 3.4% y/y, as China’s domestic consumption and demand continue to weaken.
The backdrop of the Trump administration’s escalating trade war makes these moves all the more notable. It all began when former U.S. President Donald Trump abruptly decided to increase tariffs on Chinese imports up to a steep 55.1%. In response, China has adopted its own restrictive actions, such as imposing triple-digit anti-dumping duties and export controls on critical minerals. Right now, China’s average tariff on American imports is 32.6%.
A U.S. delegation, headed by Treasury Secretary Scott Bessent, is preparing to participate in the trade negotiations. They are scheduled to meet with Chinese Vice Premier He Lifeng in London on the high levels. In each instance, Washington has rightly condemned Beijing for not living up to its agreements. This failure to approve more exports of critical minerals to the U.S. has added insult to injury.
They will still keep watching and approving applications for exporting rare earths, which are critical for many high-tech industries such as electronics, defense, renewable energy and others. This change would be a sign that China is attempting to maintain its competitive advantage. Moreover, they are prioritizing the sectors that most depend on these under-siege resources.