China’s exports surged in March as factories rushed to ship goods before the latest round of U.S. tariffs came into effect. However, the escalating U.S.-China trade war continues to cast a shadow over the outlook for manufacturing and growth in the world’s second-largest economy.
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U.S. President Donald Trump raised tariffs on Chinese goods to levels that many economists believe will heavily impact global trade flows and commercial investment.
Exports rose by 12.4% year-on-year, the highest level in five months, far exceeding the 4.4% growth forecast in a Reuters poll. In comparison, exports had risen 2.3% in January and February.
The uncertainty surrounding global trade sent shockwaves through financial markets earlier this month, after Trump announced sweeping tariffs on many countries on April 2nd. While he later unexpectedly suspended the higher tariffs for some nations, he imposed even stricter tariffs on China, which Beijing dismissed as “a joke.”
Economists have warned that the shine from March's export numbers will likely fade in the face of rapidly deteriorating expectations.
Julian Evans-Pritchard, Senior China Economist at Capital Economics, wrote in a note to clients:
“Export growth accelerated in March as manufacturers rushed shipments to the U.S.”
He added:
“However, shipments are expected to decline over the coming months and quarters… We believe Chinese exports could take years to return to current levels.”
Trump imposed a 10% tariff on all Chinese imports to the U.S. starting February 4th, followed by another 10% tariff in March, accusing Beijing of failing to curb the flow of fentanyl into the U.S.
The latest round of U.S. tariffs raised duties on Chinese goods to an unprecedented 145%, prompting Beijing to retaliate by increasing tariffs on U.S. goods by 125%, further escalating the trade war between the world’s two largest economies.
Today’s data also highlighted weak domestic demand in China, signaling that policymakers will face challenges in insulating the economy from a potential sharp downturn in trade.
Imports fell by 4.3%, compared to a 2% decline expected in the Reuters poll.
Chinese markets saw a slight uptick, although much of the activity was tied to mixed signals from Trump earlier in the week regarding tariff exemptions on smartphones and other electronics. The CSI 300 index of leading Chinese stocks rose by 0.3%.
