US tariffs take heavy toll on China (with video)

“After adjusting for Lunar New Year distortions, September export growth [to the U.S.] was the lowest single-month reading since January 1996, when the data series was first released by China customs,” noted Japanese financial services group Nomura.

“The big contraction in the growth of U.S.-bound exports was mainly due to existing higher U.S. tariffs on the $380 [billion U.S. tariff] list and an unfavorable base in September 2018, as Chinese exporters rushed to frontload their shipments to the U.S. ahead of scheduled tariff hikes on the $200 billion (tariff) list.”

Illustrating that there have been no winners in this trade war, although President Trump called for the repatriation of manufacturing from China, many producers are instead opting for low-cost options elsewhere in Asia to maintain profit levels.

China’s imports from the U.S. are also sluggish. Last month imports contracted 15.7% year-over-year after also dropping 22.3% in August, taking the quarterly average growth to minus 19.1% year-over-year in Q3 from minus 27.9% in Q2.

“As a result, China’s trade surplus with the U.S. narrowed to $25.9 billion in September from $27.0 billion in August,” said Nomura.

Nomura noted that China’s total export growth was 9.9% in 2018 and negative 0.1% in January-September 2019. This sudden slowdown of export growth “should bring down China’s gross domestic product by around 1.3 percentage point over January-September this year,” it concluded.

China’s export growth is expected to further slow in the coming months despite the current trade truce. “The truce between U.S. and China might boost sentiment, but we maintain our view that the worst is yet to come,” said the Nomura report.

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