In June, China’s exports saw a renewed surge, and imports also recovered.
The surge was largely due to companies expediting shipments to leverage a temporary tariff agreement between Beijing and Washington, anticipating an upcoming August deadline, according to a Reuters report.
Businesses globally are anticipating the outcome of negotiations between the world’s two largest economies.
The key question is whether a lasting agreement will be reached, or if the global supply chains face disruption once more due to the potential re-imposition of duties exceeding 100%.
Trade tensions intensify as China’s exports surge
China’s outbound shipments saw a 5.8% year-on-year increase in June, according to customs data released on Monday.
This figure surpassed economists’ predictions of a 5.0% rise in a Reuters poll and also exceeded May’s growth of 4.8%.
Imports rebounded 1.1%, following a 3.4% decline in May. Economists had predicted a 1.3% rise.
“There are some signs that frontloading demand is beginning to wane gradually,” Chim Lee, senior analyst at the Economist Intelligence Unit was quoted in the Reuters report.
Global supply chain concerns
Lee added:
While frontloading ahead of the August tariff pause deadline is likely to continue, freight rates for China-bound shipments to the U.S. have started to decline.
He added export controls between the US and China have eased substantially, bringing trade conditions broadly back to mid-April levels.
In June, trade relations between the US and China seemingly stabilised.
This followed an agreement to revive a delicate truce established during May talks in Geneva.
Prior to these talks, the agreement had been jeopardized by a series of export controls that disrupted global supply chains in critical industries.
China’s customs data indicates a significant increase in rare earth exports, rising 32% in June compared to the previous month.
This surge suggests that agreements reached last month to facilitate the flow of these metals may be proving effective.
Difficulties for Chinese manufacturers
Analysts caution that Beijing could face indirect harm from the expanding US global trade offensive.
Trump’s new tariffs on other trade partners may impact China, particularly through pressure on third countries extensively used for transhipments of Chinese goods.
Trump recently introduced a 40% tariff on US-bound transhipments via Vietnam. This action could potentially hinder Chinese manufacturers who are attempting to reroute shipments to evade increased duties.
The US President has proposed a 10% tariff on imports from BRICS nations, a move that significantly impacts China as a founding member of the bloc.
This potential economic measure exacerbates existing trade tensions and introduces new uncertainties for Beijing’s export-oriented economy.
The imposition of such a tariff could lead to increased costs for Chinese goods entering the US market, potentially dampening demand and disrupting established supply chains.
The White House and China have until August 12 to finalise a lasting agreement.
Compounding these challenges, tensions with the European Union have also intensified.
The EU has accused China of flooding the global market with excess capacity and enabling Russia’s war economy, an accusation made ahead of a key summit later this month.
China’s trade surplus increased to $114.7 billion in June, up from $103.22 billion in May.
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