Overall growth slows as tariffs and weak demand bite
China’s exports to the United States fell sharply by 33% in August, marking one of the steepest monthly drops in recent years. The decline comes amid intensifying scrutiny of transshipments by the U.S. and the fading impact of previous frontloading strategies. Imports from the U.S. also declined, down 16% year-over-year, according to customs data released Monday.
Despite the setback with the U.S., China’s total exports rose 4.4% in August compared to a year earlier, the slowest pace in six months and below analyst expectations for a 5% increase. The weak showing was partly due to a high comparison base in 2023, when export growth had been at a peak.
Economists warn that with the temporary benefits of the U.S.-China tariff truce wearing off, and new tariffs targeting rerouted shipments, China’s exports may face further pressure in the months ahead. Seasonally adjusted data shows little month-on-month movement, suggesting the headline growth was largely statistical.
Beijing pivots toward alternative trade partners
In response to cooling demand from the U.S., Chinese exporters have increasingly shifted focus to other global markets. Exports to the Association of Southeast Asian Nations (ASEAN) jumped 22.5%, while shipments to Africa and the European Union rose 25.9% and 10.4%, respectively. Latin America also saw a nearly 6% increase.
Zhiwei Zhang of Pinpoint Asset Management noted that China’s “going abroad” push is driven in part by sluggish domestic demand. Through August, exports to the U.S. were down 15.5% year-to-date, while those to ASEAN and the EU rose by 14.6% and 7.7%, respectively.
Still, the U.S. remains China’s top single-country trading partner, accounting for $283 billion in exports through August, followed by $541 billion to the EU bloc.
Trade tensions and transshipment scrutiny intensify
In a bid to curb tariff evasion, the U.S. has introduced a 40% tariff on goods it suspects are being transshipped through third countries. This measure directly targets a key strategy Chinese exporters have used to bypass trade barriers, creating new headwinds for outbound trade to the U.S.
The latest data shows China’s rare earth exports rose 22.6% in August to 5,791.8 metric tons, a figure closely watched after President Donald Trump threatened 200% tariffs if China failed to meet rare-earth delivery commitments. Meanwhile, trade talks have made little headway, with a late-August visit by China’s top negotiator, Li Chenggang, yielding no major breakthroughs.
The existing tariff truce, extended for 90 days in August, preserves U.S. duties of around 55% on Chinese imports and 30% Chinese duties on U.S. goods, according to the Peterson Institute for International Economics.
Domestic headwinds and policy outlook
Internally, China faces mounting economic pressure. Import growth remained tepid at 1.3% in August, missing expectations of 3%, as weak real estate activity, cautious consumer spending, and job insecurity weighed on domestic demand.
Local governments have paused consumer trade-in subsidies for vehicles and electronics, citing depleted funds. Goldman Sachs expects wholesale price inflation to remain negative, forecasting a 2.9% year-over-year drop in the producer price index. Consumer inflation is also projected to fall 0.2%.
Amid this backdrop, economists expect the People’s Bank of China to cut interest rates by 10 to 20 basis points next week. New economic data on retail sales, industrial output, and unemployment will be released Monday, and any sign of continued weakness may prompt additional stimulus.
“Beijing can use a rate cut to counter pessimism and pacify those expecting bad news to trigger good news,” said Neo Wang of Evercore ISI.
