China: Exports to the USA collapse by more than a third

China's trade with the United States has plummeted amid the dispute between the world's two largest economies. According to data from the Beijing Customs Administration, exports and imports fell significantly, as they did in April. In May, exports fell by 34.5 percent in US dollar terms. According to the Financial Times , this is the sharpest decline since February 2020. Imports fell by 18.1 percent compared to May 2024.

In mid-May, both sides agreed to a pause and a significant reduction in tariffs on goods from the other country in the previously escalating tariff dispute. High-ranking representatives from both countries planned to meet in London on Monday for talks to defuse the trade conflict. US President Donald Trump and Chinese President Xi Jinping agreed to the meeting in a telephone call on Thursday.

However, some problems remain, such as Beijing's export controls on industrially important rare earths and magnets , for which China is the world's leading processor. The United States has restricted the sale of cutting-edge technology such as computer chip design software and critical aviation components, for which China is dependent on foreign suppliers.

As recently as April, China's foreign trade significantly exceeded the expectations of many observers. The assumption was that the People's Republic would be able to increase its exports to other countries.

Overall, China's foreign trade grew again in May. Exports increased by 4.8 percent compared to the same month last year, compared to growth of over 8 percent in April. Imports, however, fell by 3.4 percent. The trade surplus amounted to approximately 103 billion US dollars (approximately 90 billion euros).

The latest figures thus narrowly missed analysts' expectations, who had previously anticipated an increase in exports of around 5 percent and a slight decline in imports.

Due to the trade conflict, Chinese exporters could no longer rely on the USA. However, goods from the Far East found other routes and buyers. As in April , China's exports to Germany surged by 21.5 percent in May, while imports from Germany fell by 1.3 percent .

The decline in imports underlines the weak domestic demand and exacerbates the already difficult economic conditions for German companies in China, said Maximilian Butek , managing board member of the German Chamber of Commerce (AHK) in China for East China.

German industry is also concerned about Beijing's export controls on rare earths. "The situation is serious: Affected German companies are waiting for urgently needed export licenses for rare earths and magnets," said Butek. According to him, AHK members are reporting isolated cases of permits being granted. But, Butek demanded, action must be taken quickly to prevent production downtime.

The People's Republic continues to experience weak domestic demand. This is also reflected in the steadily declining imports. Beijing's industrial policy has so far resulted in certain sectors producing significantly more than the market could absorb. As a result, many goods are exported at low prices. One example is the solar industry.

The fact that people in China are consuming too little is also due to the consequences of the severe real estate crisis. Many people invested in apartments that are worth less due to falling prices, which is weighing on consumer confidence. Furthermore, the weakness in this sector, which is otherwise crucial for the economy, is putting a strain on companies and local governments.

Deflationary pressure is also a problem for China's economy. As the National Statistics Office announced today, consumer prices were 0.1 percent lower in May than a year earlier. According to the FT, consumer prices fell for the fourth consecutive month. Deflation, the opposite of inflation, provides consumers with stable prices at the checkout, but puts pressure on corporate profits in the long term, which can subsequently lead to wage cuts or job losses.