Chinese Economy Struggles against US Tariffs, Exports Least Affected

US Tariffs

Unlike the Chinese imports that have fallen drastically due to increased US tariffs, the exports seem to have little effect as they returned to grow in May. The weakening sign of domestic demands could bring huge problems for the Chinese economy as they struggle with the ongoing US-China trade war.

In order to avoid the new tariffs imposed by the US amid the emerging trade disputes, the analysts believe that the Chinese exporters might have rushed out for shipments of goods that have ultimately resulted in good exports. Compared to the results in 2018, China’s exports in May rose to 1.1 percent. Economists believe the export growth is expected to remain positive in June. However, Monday’s export data shows that the US-China trade war is unavoidable and may push the economy towards recession.

One of the many reasons of eased export readings could be the business misinterpretations related to the value-added tax (VAT) in April or the world’s largest exporter might have fallen 3.8 percent from 2018. As China remains independent of exports from these markets in the present, they still hold a fifth of its gross domestic product.  

In May, Trump administration imposed new tariffs of up to 25 percent on US $200 billion of Chinese goods and later on took steps to levy duties on all remaining imports. Beijing did retaliate with higher tariffs on the US goods. The step was taken in advancement as the US government alleged China of not fulfilling its promises to bring structural changes to its economic practices.

The analysts believe that in an era of trade war, no positive results could be expected with Chinese President Xi Jinping and US president Donald Trump’s meeting at the G-20 summit later this month. Due to the heavy sanctions that have been spreading from goods to different services, including travelling in the US, visa-facilities for Chinese students and lawmakers, have led to worsening of the existing situation.  

Thereby, in an era of trade war, the analysts and the economists believe that China would have to bring in measures to stabilize its financial market to acquire growth. It would otherwise bring worst trade war results, leading to economic crisis.

In account to April’s export-import results, China’s trade surplus has increased from US $21.01 billion in April to US $26.89 billion in May. The US exports fell at 4.2 percent after dropping from 13.2 percent in April, which was significant.

In the wake of the US tariffs, China’s imports on the US goods declined to 26.8 percent from 2018. Since January to May, China’s total exports just rose to 0.4 percent as compared to 2018, while the imports dragged down to 3.7 percent.  

There is a need to lighten up the emerging trade battle that has become prominent with the increasing US tariffs. The recent ban on Huawei products has also affected the Chinese economy. The intensifying war has weakened the Chinese currency to counterbalance the rising tariffs, affecting the economic growth of China. As a result, China would have to ease out its trade policies to avoid losing amid the already heightened trade uncertainties.

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