FLASH: President Trump’s tariffs slows China growth engine
China’s exports fell the most in 3 years in February, while imports fell for a 3rd month running, pointing to a further slowdown in the economy and a trade recession despite a PBoC”s support measures.
The shockingly weak readings from the world’s largest trading nation added to worries about a global slowdown, a day after the European Central Bank (ECB) slashed growth forecasts for the Eurozone.
Global investors and China’s major trading partners are closely watching Beijing’s policy reactions as economic growth cools from last year’s 28-year low.
However, the government has vowed it will not resort to massive stimulus like in the past, which helped revive demand worldwide.
February exports dove 20.7% from a year earlier, the largest decline since February 2016, customs data showed.
Economists polled by Reuters had expected a 4.8% decline after January’s unexpected 9.1% jump.
Friday’s trade figures reinforce our view that China’s trade recession has started to emerge and that President Trump’s trade policies are working.
Imports fell 5.2 from a year earlier, worse than analysts’ forecasts for a 1.4% fall and widening from January’s 1.5% drop.
Imports of major commodities fell across the board.
That left the country with a trade surplus of $4.12-B for the month, much smaller than forecasts of $26.38-B.
Many China watchers had expected a weak start to the year as factory surveys showed slowing domestic and export orders and the US-China trade dispute continues on.
“Seasonal distortions around the Chinese New Year holiday has added noise to the export data in the past two months, and in our view explain most of the surprise,” said analysts at Goldman Sachs, whose estimate for a 20% export drop was the most pessimistic in the Reuters poll.
But they noted that export momentum on a three-month basis has moderated significantly since Q-3 last year and said “growth is likely to remain soft in the near future.
The increasingly weak China data comes amid months of intense negotiations between Washington and Beijing aimed at ending their trade dispute.
Wednesday, the US reported its goods trade deficit with China surged to an all-time high last year, underlining one of the Key sticking points.
China’s data on Friday showed its surplus with the United States narrowed to $14.72-B in February from $27.3-B in January, and it has promised to buy more US goods such as agricultural products as part of the trade discussions.
President Trump said Wednesday that trade talks were moving along well and predicted either a “good deal” or no deal between the world’s 2 largest economies. Or: “All or nothing at all!”
President Trump postponed the sharp US tariff hike slated for early March as the talks progressed, but both Washington and Beijing have kept previous duties in place.
The Chinese government’s top diplomat, State Councillor Wang Yi, said on Friday that talks had made substantive progress, and that the 2 countries’ relations should not descend into confrontation.
The government is targeting economic growth of 6.0 to 6.5% in Y 2019, Premier Li Keqiang said at Tuesday’s opening of the annual meeting of Parliament, a lower target than set for Y 2018.
China’s slowdown and the trade dispute are having an increasing impact on other trade-reliant countries and businesses worldwide.