Chinese trade figures have shown troubling signs as imports fell by 8.4% in the first two months of the year, marking a significant downturn that predates the full impact of President Trump’s newly imposed 20% tariff on Chinese imports. The unexpected drop in imports fell short of economists’ expectations, which had anticipated a modest rise. Although exports grew by 2.3%, this was a sharp decline from the 10.7% increase recorded in December and still missed the 5% forecast.
Analysts point to several contributing factors for the decline. Capital Economics notes that stockpiling of foreign goods may have slowed due to growing concerns about tariffs. Additionally, cyclical weaknesses in the economy and sluggish consumer spending are also seen as contributing factors. Despite these concerns, China’s trade surplus reached $170.5 billion in January and February, about $20 billion higher than anticipated.
To smooth out distortions caused by the lunar new year, China combines data from January and February. Even so, exports to the United States rose by only 2.3% year-on-year, a slowdown from December’s 4.9%, while exports to the European Union increased by just 0.6%, compared to 3% the previous month. While tech goods such as semiconductor chips and data processors saw growth, consumer-facing products like clothing and furniture experienced sharp declines.
The new tariffs imposed by President Trump, starting in mid-February and early March, add fresh uncertainty to China’s export-driven economy. This comes as Beijing has rolled out an economic support package during its annual ‘Two Sessions’ meetings, maintaining a 5% growth target for 2025 and raising the budget deficit to 4% of GDP.
Kelvin Lam from Pantheon Macroeconomics warns that China’s exports, which are a critical part of the country’s economic growth, may face severe challenges this year if the trade dispute with the U.S. intensifies. Lynn Song, Chief Greater China Economist at ING, states that the full impact of the tariffs will likely become clearer in the coming months unless the U.S. and China can strike a deal or agree to another delay.
As policymakers in Beijing prepare to bolster growth through stimulus measures, the outlook for China’s export engine remains uncertain. With no signs of the U.S. softening its stance, the coming months will be crucial in determining how resilient China’s economy truly is in the face of escalating trade tensions.
