As May arrives, exports from China to the United States find themselves amidst a temporary trade truce between the two largest economies. This situation seems to be “too little, too late” to effectively mitigate the tumult at the ports.
Recent government statistics indicate that Chinese freight to the U.S. saw a notable decline of 35% in May year-over-year. This represents the steepest fall since February 2020, a time marked by the Covid-19 pandemic’s upheaval of global supply chains.
This downturn follows President Trump’s decision to slash tariffs on Chinese goods from 145% down to 30%, while Beijing reciprocated by reducing its tariffs from 125% to 10% within 90 days.
Tianchen Xu, a Senior Economist at the Economist Intelligence Unit, observed the situation closely.
In contrast, the country experienced a robust rise in exports to other regions last month, including a 15% increase to Southeast Asia and a 12% uptick to European Union nations. Exports to Africa soared over 33%.
April also showed similar trends, with U.S. exports falling by 21% during that period.
Robin Brooks, a senior global economy fellow at the Brookings Institute, remarked, “These are clearly transports to the U.S. via a third country. Thailand and Vietnam are booming.” He suggested that exporters are cleverly routing goods through nations with lower tariffs to bypass Trump’s sudden levies on China.
In terms of economic performance, China reported a GDP increase of 5.4% in the first quarter as businesses hurried to stock up on imports ahead of the tariffs.
Despite these figures, ongoing deflationary pressures and reluctance among consumers persist. Signs of weak demand were evident with a 3.4% dip in imports to China in May compared to the prior year, which, while better than April’s 0.2% decline, was still disappointing.
This situation led to a Chinese trade surplus of $103.2 billion last month, a rise from $96.2 billion the month prior.
Conversely, U.S. imports dropped by over 18%, resulting in a 41.6% reduction in the trade surplus with China, bringing it down to $18 billion.
Meanwhile, negotiations between top trade officials from both countries are set to take place in London. This comes as renewed tensions have surfaced, with each side accusing the other of breaking a temporary agreement made earlier in May.
The White House has claimed that China is not living up to its commitment to resume rare earth shipments. In retaliation, Beijing criticized the U.S. for its decision to cancel export restrictions on AI chips and Chinese student visas.
Adding to the uncertainty is a recent ruling from the Federal Trade Court that blocked most of Trump’s tariffs. The Trump administration quickly filed an appeal, seeking to maintain the existing tariffs for the time being.
