Although China’s July exports to the U.S. is marginally lower than June, data shows its exports to the United States has accelerated ahead of the imposition of more tariffs.
Despite the rumblings coming from in the intensifying trade war between two of the biggest economies in the world, trade data shows China’s exports to the United States has surged more than expected in July 2018. China’s closely watched exports surplus has been a significant irritant in diplomatic and trade ties.
The news comes ahead of finalization of fresh tariff list by Washington which aims at placing 25% tariffs on another $16 billion Chinese exports to the U.S. on August 23, 2018.
Given its humongous trade surplus with the U.S., although China has repeatedly warned that it would strike back hard, in practice is has only begun or is getting ready to enforce its own tariffs.
In July 2018, China’s trade surplus with the U.S. shrank marginally to $28.09 billion from its June 2018 record of $28.97 billion.
Disagreements between Washington and China go deeper than just trade surplus: given China’s actions on U.S. intellectual property, forced technology transfer, market access and investments, Washington has grown to be wary of Beijing.
China also used the falling price of the yuan, which saw its worst ever 4 month fall between April to July, as a tool to take the sting out of U.S. import tariffs. However, analysts say, these are early days in the trade war, and China’s trade surplus with the U.S. is likely to shrink.
“Looking ahead, we expect export growth to cool in the coming months, though this will primarily reflect softer global growth rather than US tariffs, the direct impact of which will continue to be mostly offset by the renminbi’s (yuan’s) recent depreciation,” wrote Julian Evans-Pritchard, a senior economist specializing on China at Capital Economics.
China is fighting a war on two fronts: while on front is the U.S. trade war, on the other is its huge debts. Authorities in China are grappling to manage the risks from debts. The steep decline in the value of the yuan against the dollar, along with rising corporate bankruptcies have significantly dented the growth of the Chinese economy. The government has responded by releasing more liquidity into the banking system while promising a more “active” fiscal policy.
Feeling the heat, in recent weeks, Chinese state media has vowed that Beijing will not be cowed by U.S. threats.
“Certain people go against the tide for their own private ends and go against morality; the barrier of tariffs wantonly rise, and the stick of hegemony is raised all around,” said a commentary from China’s main state newspapers in reference to U.S. President Donald Trump without naming him directly.
China aims to target U.S. ambition to dominate over the global oil and gas market and aims to target U.S. exports of crude oil, refined oil, natural gas and coal.
The latest $16 billion tariff from the United States is set to hit semiconductors from China, despite the fact that many of these chips originate from South Korea, Taiwan or even the U.S.
John Neuffer, CEO and president of the Semiconductor Industry Association, said in a statement that they were puzzled and disappointed as to why semiconductors form part of the tariff list.
“We have made the case to the Administration, in the strongest possible terms, that tariffs imposed on semiconductors imported from China will hurt America’s chipmakers, not China’s, and will do nothing to stop China’s problematic and discriminatory trade practices,” said Neuffer.