By Xiuhao Chen and Ryan Woo
BEIJING (Reuters) -China’s exports rose sharply in March after factories rushed out shipments before the latest U.S. tariffs took effect, but an escalating Sino-U.S. trade war has darkened the outlook for factories and growth in the world’s second-biggest economy.
U.S. President Donald Trump has ratcheted up tariffs on Chinese goods to hefty levels that many economists say will profoundly impact global trade flows and business investment.
Exports rose 12.4% year-on-year, a five-month high, handily beating 4.4% growth expected in a Reuters poll of economists. Exports grew 2.3% in January-February.
Inbound shipments fell 4.3%, compared with a 2.0% decrease forecast in a Reuters poll, and an unexpectedly steep contraction of 8.4% at the start of the year.
Trade uncertainties have rocked financial markets this month after Trump announced sweeping tariffs on many countries on April 2. Trump unexpectedly paused the higher duties on a dozen economies days later, but slapped even stiffer levies on China that Beijing has dismissed as “a joke”.
Trump levied 10% tariffs across all Chinese imports into the United States, effective on February 4, and followed that up with another 10% in March, accusing Beijing of not doing enough to stem the flow of fentanyl into the United States.
Washington’s fresh round of tariffs lift duties on China to an eye-watering 145%, prompting Beijing to jack up levies on U.S. goods by 125% in an intensifying trade war between the world’s two biggest economies.
“Frontloading of exports remained strong – stronger than our expectations,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
This suggests that Chinese companies could still absorb the 20% fentanyl-related tariffs, adding that data also points to potential transshipments via Southeast Asia to circumvent tariffs.
FIGHT TO THE END
Beijing has vowed to fight U.S tariffs to the end and protect the economy from “external shocks”, with markets widely expecting authorities to roll out further fiscal and monetary stimulus measures in coming months to underpin growth.
The World Trade Organization has warned the high-stakes Sino-U.S. trade row could cut the shipment of goods between two economies by as much as 80% and severely hurt global growth.
Goldman Sachs last week lowered its forecasts for China’s 2025 GDP growth to 4% from 4.5%, citing the effects of tariffs. Citi cut its forecast to 4.2% from 4.7% two days earlier. Their revised forecasts are well below the government’s growth target of “around 5%”
Exports have been a lone bright spot in China’s economy, which has struggled to mount a solid post-COVID recovery as confidence has remained low in the face of a protracted property crisis and deepening deflationary pressures.
Commodities trade shows imports from the United States may have already been affected by the trade spat.
Overall soybean imports tumbled by 36.8% in March from a year earlier.
“China seems to stop its farming imports from the U.S. altogether already,” said Xu.
“Its soybean imports tumbled by around half in March during a high season of China-U.S. farming trade, perhaps because state-owned importers already received the guidance to stop imports,” he said.
China’s March trade surplus was $102.64 billion, down slightly from $104.8 billion in December, the most recent comparable reading, but roughly in line with the level recorded a year earlier.
This will likely keep the production powerhouse in Trump’s sights given that bringing the trade gap down is at the top of his agenda.
(Reporting by Xiuhao Chen, Ethan Wang and Ryan Woo; Editing by Kim Coghill & Shri Navaratnam)
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