This dynamic is clearly apparent across the East China Sea, in China’s accelerating exports, which shot up nearly 5.8% in June over the same month last year. This increase represented a significant uptick from May’s lackluster 4.8% increase, reflecting a stronger rebound of trade activity. This jump in exports is in part due to a temporary relief from U.S. tariffs. This policy shift has triggered a tidal wave of advance orders from corporate fleets and individual consumers.
Even with this significant overall growth, exports to the U.S. dropped by 16% in June. Yet, this loss was far more mild than the record 34.5% fall seen in May. The reduction in exports to the U.S. illustrates ongoing challenges in the trade relationship between the two nations, even as other markets show resilience.
In the first half of the year, China reported a global trade surplus of $586 billion, highlighting its robust trading position. Total trade —exports plus imports— hit an all-time high. It finally passed 20 trillion yuan, about equal to $2.8 trillion. This boom in trade activity is indicative of greater global demand for Chinese goods and a nascent domestic recovery in consumption.
And even though total exports nationwide increased, some sectors have struggled. In particular, shipments of auto parts plunged over 23%. In stark contrast, exports to Southeast Asia continued with strong growth, with the region growing +13% YoY from January through June. Shipments to Thailand increased by 22%. At the same time, exports to Vietnam were up almost 20%, and exports to India were up over 18%.
With imports swiftly rebounding, this was enough to shift China’s trade picture to a more balanced state. In June, that translated to a 1.1% growth, which was the first increase of the year. This increased performance indicates that domestic demand is beginning to pick up again, likely lending some additional momentum and strength to the economic picture.
Nonetheless, experts are wary about what the future holds for China’s export market. Zichun Huang of Capital Economics noted that “tariffs are likely to remain high and Chinese manufacturers face growing constraints on their ability to rapidly expand global market share by slashing prices.” This feeling of loss represents the tough waters Chinese exporters must continue to swim in as they face a changing global reality.
