BEIJING (Reuters) -China’s export growth probably slowed in July, as manufacturers await clarity on whether Beijing can reach a deal with its top consumer market, the United States, or if President Donald Trump will reinstate additional tariffs on Chinese goods.
Outbound shipments were expected to have risen an annual 5.4% in value terms, according to the median forecast of 34 economists in a Reuters poll, down from a 5.8% increase in June.
Imports likely shrank 1.0%, reversing a 1.1% rise previously, with domestic demand still in the doldrums amid a protracted property crisis that has consumers tightening their purse strings.
Trump’s erratic trade policy – marked by multiple rounds of tit-for-tat tariff hikes with Beijing – has heaped pressure on China’s export-oriented economy, posing a serious test to its long-standing growth model.
China is facing an August 12 deadline to reach a durable tariff agreement with the U.S. administration, after Beijing and Washington reached framework agreements in May and June to reduce non-tariff barriers such as in rare earth minerals and technology to avoid further escalating their trade war.
Without a deal, global supply chains could face renewed turmoil from U.S. duties snapping back to triple-digit levels that would amount to a bilateral trade embargo.
Trump said on Tuesday the U.S. was close to a trade deal with China and that he would meet his Chinese counterpart Xi Jinping before the end of the year if the world’s two largest economies could come to an agreement.
China’s July trade surplus is forecast to narrow to $105 billion from $114.77 billion in June. Separate data from the U.S. Commerce Department’s Bureau of Economic Analysis on Tuesday showed that the U.S.’s trade gap with China shrank to its lowest in more than 21 years in June.
Chinese government advisers are stepping up calls to make the household sector’s contribution to broader economic growth a top priority at Beijing’s upcoming five-year policy plan, as trade tensions and deflation threaten the outlook.
And top leaders have vowed to step up regulation of aggressive price-cutting by Chinese companies that is pushing prices ever lower.
But economists warn that reversing the current deflationary slump will be far more difficult than during the last round of supply-side reforms a decade ago, as the downturn now poses a broader threat to employment, which Chinese leaders have emphasised is a core component of social stability.
Reaching an agreement with the United States — and with the European Union, which has accused China of producing and selling goods too cheaply — would give Chinese officials more room to advance their reform agenda.
However, analysts expect little relief from Western trade pressures. Export growth is projected to slow sharply in the second half of the year, hurt by persistently high tariffs, President Trump’s renewed crackdown on the rerouting of Chinese shipments and deteriorating relations with the EU.
(Reporting by Joe Cash; Polling by Veronica Khongwir and Susobhan Sarkar in Bengaluru and Jing Wang in Shanghai; Editing by Jacqueline Wong)
Comments