China’s exports beat gloomy forecasts to rebound in May though imports sank more than expected as the trade war with the United States heats up, official data showed Monday.
The spat between the world’s top two economies escalated last month, with President Donald Trump increasing tariffs on $200 billion in Chinese goods.
But Chinese exports to the world bounced back to rise 1.1 percent last month after falling 2.7 percent in April, according to customs data. Analysts surveyed by Bloomberg News had forecast a 3.9 percent drop.
Imports, however, plummeted 8.5 percent after rising 4.0 percent in April.
The trade surplus surged to $41.7 billion in May compared with $13.8 billion the previous month.
Trade talks between the United States and China have stalled while the two countries have threatened to slap more sanctions on each other.
Trump has blacklisted Chinese telecom giant Huawei and warned that he could impose tariffs on nearly all remaining products from China, worth more than $300 billion.
Beijing responded to Trump’s latest tariff hike by increasing levies on $60 billion in US products on June 1.
China is also preparing its own blacklist of “unreliable” companies and has suggested that it could halt exports of rare earths — key to the production of many high-tech goods — to the United States.
Trump is expected to meet Chinese President Xi Jinping at the G20 summit in Japan at the end of the month.
US Treasury Secretary Steven Mnuchin said at a G20 meeting of finance ministers Saturday that any potential deal with China will wait until the two presidents meet later this month, but Washington was ready to impose new tariffs if talks fail.
Asian markets rose Monday and the Mexican peso rallied more than two percent after Donald Trump dropped threatened tariffs against Mexico, while weak US jobs data fanned expectations the Federal Reserve will cut interest rates next month.
Speculation about a cut in borrowing costs saw the dollar retreat against most high-yielding currencies though the pound remains subdued owing to Brexit uncertainty.
Traders breathed a sigh of relief the North American neighbours reached a last-minute immigration deal Friday that averted the imposition of five percent levies on Mexican imports and opening up of another front in Trump’s global trade battle.
However, analysts pointed out that while the agreement was good news, the stand-off between China and the United States remains unresolved, with eyes on a possible meeting between Trump and Xi Jinping at the G20 summit in Japan this month.
“The focus will now shift back to the G20 and China,” strategists at TD Securities including Richard Kelly wrote in a note. “Despite the positive result with Mexico, the US-China trade dispute is a different creature, and tensions remain high.”
At the weekend finance ministers of the G20 issued a post-meeting communique saying “growth remains low and risks remain tilted to the downside”.
It added that “trade and geopolitical tensions have intensified” but they “stood ready to take further action” if it is needed.
– Fed cut ‘on the table’ –
Still, regional markets were well up Monday with Hong Kong jumping two percent and Shanghai 0.6 percent higher, while Tokyo ended the morning more than two percent higher.
Singapore climbed 0.9 percent, Seoul added 0.7 percent and Taipei rallied 1.2 percent with Jakarta 1.4 percent higher. Wellington and Manila were slightly down.
The dollar was on the back foot after the Labor Department on Friday said the economy created less than half the forecast amount of jobs last month, while wage growth stagnated, indicating the world’s top economy was slowing down.
“The miss by the US jobs report could force the hand of the Fed into making an interest rate cut,” said OANDA senior market analyst Alfonso Esparza.
“A summer cut could be on the table, unless US inflation and retail sales can turn the tide set in motion by the weak May jobs report.”
Oil prices extended Friday’s sharp gains, which came after Saudi Arabia and Russia said they would continue with their output caps, while the weaker dollar also provided support to the commodity.
However, analysts warned that the China-US trade war and concerns about weakening demand would keep prices under pressure.