In May, China’s exports to the United States experienced a significant decline, dropping by 35% compared to the same month in the previous year, according to recent customs data. This decline exacerbates the pressures facing China, the world’s second-largest economy, as it prepares for a new round of trade discussions with the United States slated for later Monday in London.
While China’s overall exports increased by 4.8% last month, this growth rate is a slowdown from April’s year-on-year increase of 8.1%. Imports showed a decrease of 3.4%, resulting in a trade surplus of $103.2 billion. Specifically, in May, China exported $28.8 billion worth of goods to the U.S., a substantial drop from the $44 billion recorded the previous year. Concurrently, imports from the U.S. declined to $10.8 billion.
Despite the decline in exports to the U.S., China’s exports to Southeast Asia and the European Union continued to grow healthily, recording year-on-year increases of 14.8% and 12%, respectively. There was a notable rise in exports to countries like Thailand, Vietnam, and Indonesia, while exports to Germany surged over 12%.
According to Lynne Song of ING Economics, the rise in exports to other regions has helped keep China’s exports relatively stable amid ongoing trade tensions. Many businesses placed rushed orders earlier to avoid higher tariffs, leading to a slowdown in shipments once new tariffs came into effect. However, export activity is expected to see some recovery in June due to a 90-day suspension of tariffs enacted by both China and the U.S. amidst their escalating trade tensions, according to Zichun Huang of Capital Economics.
Huang further explained that, despite this temporary truce and the ongoing high tariff levels, Chinese manufacturers face broader challenges that might limit their capacity to maintain rapid growth in their global market share. As such, export growth is projected to decelerate by the end of the year.
Despite the temporary reduction in tensions, disagreements between Beijing and Washington have persisted, fueled by disputes over advanced technology industries—including semiconductors and “rare earths”—and by the treatment of Chinese students in American universities. The trade discussions, set to take place later in London, follow a recent phone call between President Trump and Chinese President Xi Jinping, but it remains uncertain whether this dialogue will spur significant progress during this week’s talks.
President Trump commented that during their conversation, Xi agreed to resume exports of rare earth minerals and magnets to the U.S., which had been reduced by China, impacting various U.S. manufacturers dependent on these critical resources. However, there has been no immediate confirmation from China. Data from Monday revealed a nearly 21% decline in the monetary value of China’s rare earths exports from January to May compared to the previous year, though the volume of exports rose by 2.3%.
Similar patterns have emerged with other industrial products and commodities, such as shoes, ceramics, and cell phones, where decreasing demand is leading to reduced prices. Other economic indicators released Monday also underscored the pressures on China’s economy due to stunted exports. With many manufacturers relying on imported components for their exports, the decline in imports highlights these challenges.
In addition, China’s domestic markets are under strain, with consumer prices registering a 0.1% decline in May, indicative of weak demand. This ongoing deflation partly results from falling food prices, according to economists. Moreover, producer price deflation deepened, contracting 3.3% in May, marking its lowest point in almost two years, following a 2.7% fall in April.