China’s exports slumped in December as a rush of orders to beat expected tariffs showed signs of fading and as domestic buyers succumbed to a worsening economic outlook.
The worse than expected figures, with exports falling 4.4% in December from a year earlier, set a grim domestic backdrop for China’s negotiators as they seek a deal to end the stand-off with the Trump administration.
The fall in exports was the worst result since 2016 in dollar terms while imports slumped 7.6%, also the worst reading since 2016 and hinting at softening demand at home.
At the same time, China’s overall trade surplus with the US hit a record in 2018, underscoring the political imperative to cut a deal ahead of a March 1 deadline after which US President Donald Trump has threatened to impose additional tariffs on Chinese goods.
The numbers show how the world’s biggest trading nation is being hit by a confluence of slowing global growth and by uncertainty linked to the trade war--factors that are expected to linger in the near term, at least.
“The bad trade data will quite likely increase the pressure on China to achieve a deal, or at least a suspension of the US tariff hikes,” said Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong. “At the same time, the US side also seems to be under more pressure to de-escalate tension in terms of news on the economy and financial markets than a few months ago.”
Chinese Vice Premier Liu He is slated to travel to the US for further talks around the end of this month, with little progress seen so far on the tougher areas of the dispute such as China’s treatment of intellectual property or support for state firms.
The headwinds from trade come at a time when policymakers are already grappling with decelerating consumption, falling factory sentiment, fears of producer deflation and a worsening employment outlook.
Stocks dropped in Europe and Asia, with US equity futures also declining as the data reignited fears over global growth.
“Cargo volume to the US on trans-Pacific trade increased until November as exporters pushed cargo forward to avoid the US increase,” according to a spokesman for Hyundai Merchant Marine Co, South Korea’s biggest container line. “From December to now cargo volume has returned to normal levels, indicating that forward shipment of good before the tariff increase has concluded. Still, we are expecting cargo volume to pick up before the Lunar New Year toward the end of January."
There’s worse news to come, according to economists at Commerzbank AG and Australia & New Zealand Banking Group Ltd.