China December Trade Slumps as Trade War, Economic Slowdown Bite

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Chinese trade slumped in December, sending regional stocks and the Australian dollar lower, as an unexpected fall in both exports and imports underlined the impact of the trade war and economic slowdown.

Exports in dollar terms fell 4.4 percent from a year earlier, while imports dropped 7.6 percent. Both were the worst result since 2016, and left a trade surplus of $57.1 billion.

China ended 2018 on a soggy note, with factory gauges entering contractionary territory, producer prices closer to deflation, and a drop off in the front-loading of shipments that had seen companies race to beat tariff increases. The downbeat trade data reignited concerns over global growth, weighing on regional equity benchmarks and currencies tied to China’s fortunes, such as Australia’s and New Zealand’s.

"There is a clear downward trend," said Zhou Hao, an economist with Commerzbank AG in Singapore who was among the few accurately forecast a December contraction in exports. "This is not just due to the trade war and tariffs. On top of those, the major drag is slowing global demand."

Bloomberg’s Global Trade Checkup has been weakening, with most of the 10 readings used to check the pulse of global commerce at the lower end of their average ranges.

A Fragile Truce Keeps Global Trade on Edge

Negotiators from China and the U.S. expressed optimism after mid-level talks wrapped in Beijing last week, bringing some temporary relief to global investors. Chinese Vice Premier Liu He is scheduled to visit the U.S. for the next round of talks in late January, but a pathway to a lasting resolution remains unclear

"While we don’t expect China and the U.S. to reach a grand deal before March 2019, we see 50 percent chance of some progress and further delays in additional tariffs," UBS Group AG economists Ning Zhang and WangTao wrote in a recent note. "That said, due to persistent threat of higher tariffs and other related uncertainties, the positive impact of further tariff delays on overall economic growth will be limited."

China’s policy makers have rolled out measures to support the domestic economy including more accommodative monetary and fiscal policies, as evidence mounts of the worsening slowdown. Stabilizing trade is one of the goals the leadership set for 2019, on top of supporting employment, investment and the finance sector.

For the whole of 2018, the picture was rosier -- exports rose by 9.9 percent in 2018 in dollar terms to $2.48 trillion, while imports surged 15.8 percent last year, leaving a trade surplus of $351.8 billion, the customs administration said Monday.

The surplus with the U.S. rose more than 17 percent to $323.3 billion in 2018, driven by an 11 percent jump in exports and flat imports.

--With assistance from Kevin Hamlin, Yinan Zhao and Xiaoqing Pi.

To contact Bloomberg News staff for this story: Miao Han in Beijing at mhan22@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Malcolm Scott, James Mayger

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With assistance from Bloomberg