By Yukun Zhang, Qiaoyi Li, Ellen Zhang and Ryan Woo
BEIJING (Reuters) -China’s export growth slowed to a three-month low in May as U.S. tariffs slammed shipments, while factory-gate deflation deepened to its worst level in two years, heaping pressure on the world’s second-largest economy on both the domestic and external fronts.
U.S. President Donald Trump’s global trade war and the swings in Sino-U.S. trade ties have in the past two months sent Chinese exporters, along with their business partners across the Pacific, on a roller coaster ride and hobbled world growth.
Underscoring the U.S. tariff impact on shipments, customs data showed that China’s exports to the U.S. plunged 34.5% year-on-year in May in value terms, the sharpest drop since February 2020, when the outbreak of the COVID-19 pandemic upended global trade.
Total exports from the Asian economic giant expanded 4.8% year-on-year in value terms last month, slowing from the 8.1% jump in April and missing the 5.0% growth expected in a Reuters poll, customs data showed on Monday, despite a lowering of U.S. tariffs on Chinese goods which had taken effect in early April.
“It’s likely that the May data continued to be weighed down by the peak tariff period,” said Lynn Song, chief economist for Greater China at ING.
Song said there was still front-loading of shipments due to the tariff risks, while acceleration of sales to regions other than the United States helped to underpin China’s exports.
Imports dropped 3.4% year-on-year, deepening from the 0.2% decline in April and worse than the 0.9% downturn expected in the Reuters poll.
Exports had surged 12.4% year-on-year and 8.1% in March and April, respectively, as factories rushed shipments to the U.S. and other overseas manufacturers to avoid Trump’s hefty levies on China and the rest of the world.
While exporters in China found some respite in May as Beijing and Washington agreed to suspend most of their levies for 90 days, tensions between the world’s two largest economies remain high and negotiations are underway over issues ranging from China’s rare earths controls to Taiwan.
Trade representatives from China and the U.S. are meeting in London on Monday to resume talks after a phone call between their top leaders on Thursday.
China’s imports from the U.S. also lost further ground, dropping 18.1% from a 13.8% slide in April.
Zichun Huang, economist at Capital Economics, expects the slowdown in exports growth to “partially reverse this month, as it reflects the drop in U.S. orders before the trade truce,” but cautions that shipments will be knocked again by year-end due to elevated tariff levels.