China Export Surge Highlights Trump's Cause as Tariffs Readied

(Bloomberg) -- China’s exports surged and its trade surplus unexpectedly widened in February, illustrating the lopsided nature of global commerce that Donald Trump is preparing to introduce protectionist measures against.

Overall exports rose 44.5 percent in February from a year earlier and those to the U.S. surged 46.1 percent, customs data showed Thursday. Import growth slowed to 6.3 percent to leave a trade surplus of $33.7 billion. China’s aluminum exports ballooned to a three-year high while those of steel dropped 27 percent for the first two months.

Even though seasonal effects and the yuan’s weakness last month likely distorted the data, buyers for China’s exports, from industrial metals to consumer electronics and clothing, are not in short supply. It’s in the face of such demand that the U.S. President is due to sign orders for fresh tariffs later Thursday, with more potentially on the way -- despite opposition from allies, Republican lawmakers and his own chief economic adviser.

Click here for more on steel and aluminum exports to the U.S.

“Global demand remains robust and the economies of the U.S. and Europe are expanding, that’s the biggest boost for Chinese exports,” said Xia Le, chief Asia economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. “The risk of a trade war in which Trump increases tariffs for a broader scope of products seems to be rising.”

Other data show:
  • Total trade with the U.S. stood at 627.8 billion yuan ($99 billion) in the first two months, up 15.8 percent from a year ago, customs said in a statement
  • China’s monthly surplus with the U.S. widened from a year earlier to $20.96 billion 

The readings come as the legislature convenes in Beijing for its annual meeting to chart policy for the coming year. Premier Li Keqiang on Monday announced a 2018 growth goal of around 6.5 percent, omitting an aim for a faster pace, while pledging to open markets further and seek “more balanced development of trade.”

China Export Surge Highlights Trump's Cause as Tariffs Readied

Elements of the report illustrate the intertwined nature of global trade that unilateral tariffs can do little to untangle. Exports and imports of foreign-invested enterprises in the first two months reached 1.92 trillion yuan, making up 42.4 percent of the country’s total trade. In the same period, machinery and electronics exports rose 18 percent to 1.43 trillion yuan, making up 58.4 percent of exports.

While February data look dramatic, economists warn against over-interpreting numbers from the first two months of the year. Seasonal swings -- related to the shutdown of factories and office over the Chinese New Year holiday often make interpretation complicated, and this year a low base comparison from the previous year may have inflated the data.

What our economists say:

The export surge is surprising as holiday effects were expected to crimp gains, “but it’s still very likely a reflection of one-off effects, not a change in the trend,” Bloomberg economists Tom Orlik and Fielding Chen said in a note. “Policy makers will find it as difficult as traders to make any sense of what the data say about trends, so the implications for policy are limited.”

That may count for little in the current febrile atmosphere of U.S.-China trade politics. China’s Foreign Minister Wang Yi on Thursday vowed a “justified and necessary response” to trade threats, following Trump’s hints broader protectionist measures are on the way.

“A trade war is never the right solution,” Wang said at a briefing on the sidelines of the congress. “In a globalized world, it is particularly unhelpful, as it will harm both the initiator and the target countries.”

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

©2018 Bloomberg L.P.

With assistance from Miao Han, Kevin Hamlin