China’s exports experienced a decline in October, marking the first decrease in eight months, according to official data released on Friday. The drop occurred amidst escalating trade tensions between China and the United States, just prior to a meeting between Chinese President Xi Jinping and US President Donald Trump.
The country’s shipments fell by 1.1 percent year-on-year, missing a forecasted 2.9 percent rise by Bloomberg. In contrast, imports rose by 1.0 percent in the same month, which was lower than the 2.7 percent increase predicted by Bloomberg. The data was released by China’s General Administration of Customs.
The trade tensions between China and the US had been intensifying in the weeks leading up to the meeting between Xi and Trump, with both countries imposing tariffs on each other’s goods. However, after their meeting in South Korea, the two leaders agreed to suspend a raft of measures for a year, effectively putting a pause on the trade war.
Prior to the meeting, Beijing had announced fresh restrictions on exports of rare earth technologies, a sector dominated by China and critical to defense and auto manufacturers. In response, Trump threatened to impose an additional 100 percent tariff on Chinese goods. However, this warning was later called off after the meeting between the two leaders.
As part of the agreement, Washington halved a blanket tariff on Chinese goods to 10 percent, while Beijing loosened restrictions on rare earth exports, providing relief to European businesses. China also lifted extra tariffs on US agricultural products, including soybeans, which is a critical export for American farmers.
According to customs data, China’s imports from the US fell by 11.6 percent month-on-month in October, while its shipments to the US rose by 1.8 percent. Economists attribute the decline in exports to the frontloading of trade by Chinese exporters to avoid high tariffs in the US. With the trade war on hold for a year, exports are likely to normalize, but China will need to rely more on domestic demand to drive growth.
The decline in exports is a significant development in the ongoing trade tensions between China and the US. As the world’s two largest economies, their trade relationship has a significant impact on the global economy. The agreement to suspend tariffs and ease restrictions on trade is a positive step towards resolving the trade war, but it remains to be seen how the situation will unfold in the coming months.