China Loves a Trade War

China Loves a Trade War

Trade tensions between the US and China have been intensifying over recent months with each country imposing levies on mutual imports with extra duties. In July, Washington imposed tariffs on $34 billion worth of Chinese goods. US President Donald Trump accused Beijing of “being vicious” on trade, stressing that Chinese measures were targeting US farmers on purpose.

President Trump had repeatedly expressed discontent over the US trade deficit with China, accusing the country of unfair trade practices, intellectual property theft, currency manipulation, and of providing state aid to Chinese firms.

In July, the Chinese trade surplus with the US dropped three percent, reports South China Morning Post. China’s exports to the US fell by 2.5 percent to $41.5 billion month-on-month, while imports of US goods plunged 1.5 percent to $13.4 billion, according to data from General Administration of Customs on Wednesday, as quoted by the media.

All in all, China’s trade surplus with the US shrank to $28.08 billion in July against $28.97 billion in the previous month. Year-on-year, the growth of China’s exports to the US slowed to 11 percent last month from 12.5 percent in June, while import growth accelerated to 11 percent from 9 percent.

China has decided to impose additional tariffs on imported products from the United States worth about 16 billion U.S. dollars, according to an official statement released Wednesday.

Approved by the State Council, the Customs Tariff Commission of the State Council has decided to impose additional duties of 25 percent on the 16-billion-dollar of U.S. products after making proper adjustments to the second part of a list of the products subject to the tariffs.

The additional duties will take effect at 12:01 on Aug. 23, 2018.

The list has been appropriately adjusted after taking into account the advice of related government departments, industry associations, and enterprises to best protect the interest of domestic consumers and companies.

Alongside the statement, the customs tariff commission published a final version of the second part of the list on the website of the Ministry of Finance.

In June, the customs authority unveiled a list of products from the United States worth 50 billion U.S. dollars that will be subject to additional tariffs in response to U.S. announcement to impose additional duties on Chinese imports.

Additional duties on the U.S. products in the first part of the list, worth 34 billion U.S. dollars, came into force on July 6.

China’s foreign trade maintained steady growth in the first seven months of this year despite escalating trade tensions with the United States, with data pointing to a more balanced trade picture.

China’s goods trade went up 8.6 percent year on year to 16.72 trillion yuan (about 2.45 trillion U.S. dollars) in the January-July period of this year, customs data showed Wednesday.

Exports rose 5 percent year on year while imports grew 12.9 percent, resulting in a trade surplus of 1.06 trillion yuan, which narrowed by 30.6 percent, according to the General Administration of Customs.

“The steady growth in the first seven months is a hard-won result amid external uncertainties,” said Bai Ming with the Ministry of Commerce research department.


July’s trade data was under the spotlight as it was the first reading since fresh U.S. tariffs on a wide range of Chinese goods went into effect.

The United States slapped an extra 25 percent tariff on 34 billion U.S. dollars worth of Chinese imports beginning July 6, to which China responded with an equivalent retaliatory measure.

In July, China’s exports rose by 6 percent to 1.39 trillion yuan, a reading that beat market expectations, Huatai Securities said in a research note.

The better-than-expected growth might be partly because China tends to strengthen economic and trade ties with other major economies amid trade tensions with the United States, it said.

Wednesday’s data showed that China’s trade with the United States totaled 2.29 trillion yuan in the first seven months, up 5.2 percent year on year.

During the same period, trade with the European Union, its largest trading partner, climbed 5.9 percent, and trade volume with ASEAN countries increased by 11.6 percent.

Trade with countries along the Belt and Road totaled 4.57 trillion yuan, up 11.3 percent year on year, 2.7 percentage points faster than the average growth rate, data showed.

“The tariffs have so far had a limited impact on overall trade,” China Merchants Securities said in a research note.

While short-term effects might be mild, the impact of U.S. tariffs on China’s trade may be gradually revealed as time passes and more tariffs on Chinese goods threatened by the United States take effect, it noted.


Wednesday’s data also revealed a more balanced trade picture, with China’s imports jumping 20.9 percent to reach 1.21 trillion yuan in July.

Thanks to the surge, the trade surplus narrowed by 42.6 percent to 176.96 billion yuan last month. In the first seven months, the trade surplus narrowed by 30.6 percent compared with a year ago.

China has been seeking a more balanced trade pattern, with a series of pro-import policies introduced.

Earlier in July, China’s State Council released guidelines on expanding imports, promising tariff cuts, clean-ups of unreasonable price mark-ups, and better intellectual property rights protection.

The policy incentives have had positive impacts on imports, Huatai Securities noted.

It added that a decision of intensifying efforts to improve infrastructure, made at a meeting of the Political Bureau of the Communist Party of China Central Committee in late July, will further drive imports of industrial raw materials such as iron ore.

Looking forward, China tends to maintain strong imports, while exports are also likely to hold steady despite uncertainties rising from trade tensions with the United States, Bai said.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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