Chinese exports accelerate despite US tariffs, surplus remains strong

SHANGHAI: Employees work at a bank in Shanghai yesterday. China is slapping additional import tariffs of 25 percent on $16 billion worth of US goods ranging from oil and steel products to autos and medical equipment, the commerce ministry said yesterday. — AFP

BEIJING: China is slapping additional import tariffs of 25 percent on $16 billion worth of US goods ranging from oil and steel products to autos and medical equipment, the commerce ministry said, as the world's two largest economies escalate their trade dispute.

"This is a very unreasonable practice," the commerce ministry said on its website www.mofcom.gov.cn, responding to the United States' decision to slap 25 percent tariffs on another $16 billion of Chinese goods on Aug 23.

China's exports surged more than expected in July despite US duties and its closely watched surplus with the United States remained near record highs, as the world's two major economic powers ramp up a bitter dispute that some fear could derail global growth.

In the latest move by President Donald Trump to put pressure on Beijing to negotiate trade concessions, Washington is set to begin collecting 25 percent tariffs on another $16 billion in Chinese goods on Aug 23. In a statement on its official website late yesterday, China's commerce ministry criticized the US move as being "unreasonable", saying it had no choice but to adopt the same measure on an equal amount of American goods ranging from oil and steel products to autos and medical equipment.

Yesterday's Chinese data provide the first readings of the overall trade picture for the world's second-largest economy since US duties on $34 billion of Chinese imports came into effect on July 6.

All the same, China's exports for July rose a bigger than expected 12.2 percent year-on-year, showing little tariff impact for now and beating June's 11.2 percent rise and analysts expectations in a Reuters poll for 10 percent growth.

Of more direct consequence in the Sino-US trade war, China's surplus with the United States shrank only marginally to $28.09 billion last month from a record $28.97 billion in June. Washington has long criticized China's trade surplus with the United States and has demanded Beijing cut it.

Tariffs to hit

The first round of President Donald Trump's punitive tariffs on China will hit the full $50 billion in goods starting August 23, the government announced Tuesday.

Washington already imposed 25 percent tariffs on $34 billion in Chinese products on July 6. But it held off on a final $16 billion as a result of concerns raised by US companies. Although the move was expected, it cements the view that there appears to be no effort underway to defuse the dispute between the world's two largest economies that have continued to exchange threats. China has already retaliated with duties of its own, and has pledged to match the United States dollar-for-dollar with new tariffs, including on the next $16 billion.

Americans import far more from China than the other way around, however, meaning Beijing may at some point need to look for other means of retaliation.

Economists say China appears to be taking a more hands-off approach to the yuan, which marked its worst 4-month fall on record between April and July and has provided some reprieve for exporters in the face of the rising trade tensions.

ANZ senior China economist Betty Wang said Beijing will likely resist using its closely managed currency as a tool in the trade war. "Currency devaluation, which may have helped exports to some extent, has been largely market-driven in our view and is not a preferred policy tool by Chinese policy makers as part of the retaliation measures," Wang said.

China's trade with the US also continued to rise in July despite the tariffs, with exports up 11.2 percent year-on-year, and imports increasing 11.1 percent. Analysts still expect a less favorable overall trade balance for China in coming months given it's early days in the tariff brawl.

Beijing boosts liquidity

After a strong start to the year, growth in the world's second-largest economy cooled slightly in the second quarter, partly hit by the government's years-long efforts to tackle debt risks.

China's imports rose 27.3 percent year-on-year in July, in a sign domestic demand remains solid, but the worry is that the escalating Sino-US trade war, rising corporate bankruptcies, and a steep decline in the yuan could put a significant dent on the economy.

The government has responded by releasing more liquidity into the banking system, encouraging lending and promising a more "active" fiscal policy. World financial markets have taken a battering in recent months as fears grow that Trump's "America First" policies could derail a global economic revival.

Several large American companies have said they would adjust their supply chains to source outside of China if tariffs on Chinese goods impacted them, while China's Haier Group said rising steel prices amid hefty US import tariffs was driving up costs for its business in America.

"Stick of hegemony"

China has repeatedly warned it will strike back against any further punitive measures by Trump, saying the United States is threatening the global free trade order with its protectionism. Chinese state media, reflecting the government's stance, has said China will not be cowed in the face of US threats. The latest commentary from state media on Wednesday took a softer line after resorting to personal attacks against Trump earlier in the week, saying China could get through the storm but refrained from directly mentioning the US president.

China has not yet given a date for its previously announced retaliatory tariffs on $16 billion in US goods, which will target commodities such as crude oil, natural gas, coal and some refined oil products.-Reuters