Saturday, 17 November, 2018

China trade surplus with U.S. hits historic high & timing couldn’t be worse

People walk past an electronic board showing Japan's Nikkei average outside a brokerage in Tokyo China trade surplus with U.S. hits historic high & timing couldn’t be worse
Nellie Chapman | 13 July, 2018, 22:54

China's trade surplus with the USA has grown to a record high of almost $29 billion in June.

Last week, the United States and China introduced tariffs of 25 percent on $34 billion of each other's exports.

Against this overall background, Australia is in the fortunate position of avoiding a trade dispute with the United States and largely being spared from the impact of the new United States tariffs.

"We expect the trade numbers for July to disappoint since that's when the first round of USA tariffs took effect", said Amy Zhuang, China analyst at Nordea Bank in Singapore.

Statistics showed that in the first six months of the year, China's exports to the United States rose 13.6 percent from a year earlier, while imports from the U.S. increased by 11.8 percent.

However, a lower yuan would make it more expensive for China to import U.S. goods.

Exports rose 11.3 per cent over a year earlier to $216.7 billion, down from May's 12.6 per cent growth, customs data showed Friday.

While China continues to benefit from strong global demand for its goods for now, the rising trade tensions with the United States has the potential to hurt both sides.

The record deficit last month threatens to irritate the White House, which wants to see the extra tariffs on imports reversing the recent trend.

Investors fear a prolonged trade battle with the United States could harm business confidence and investment, disrupting global supply chains and harming growth in China and the rest of the world. "Not only will Chinese exporters suffer but American consumers as well", she said.

Not unexpectedly, several readers have expressed concern about the possible impact of the introduction of new United States tariffs on Chinese, Canadian and European imports on Australian and world share markets.

But, he said, China has another option - Beijing could reduce the impact of USA tariffs on exporters by devaluing the yuan to make its goods cheaper for American consumers.

Imports increased by 14.1%, below the forecast 21.3%.

In a sign Beijing is seeking alternative supplies of the commodities as it hit USA imports with extra tariffs, China had dropped import tariffs on a range of animal feed ingredients from several Asian countries.

The trade balance between the two countries, which is at the centre of the trade dispute, continued to move in favour of China.

The surplus was the highest ever with the U.S. for any single month, according to Reuters calculations based on official data going back to 2008. The surplus was China's highest since December. The trade surplus was 261.88 billion yuan last month, official data showed.