China Exports Surge as Southeast Asia Trade Offsets US Drop
China’s export numbers defied expectations in April, with China exports surge even as the nation’s trade with the US plunged under the weight of steep tariffs. Instead, robust demand from Southeast Asian countries propelled growth, showcasing how China’s export engine is adapting to shifting global relationships. This article explores why China exports surge, how Southeast Asia is playing a bigger role, and what these shifts mean for China’s economy and global trade.
Exports Jump Despite US Tariffs
According to new data released by China’s customs authority, exports jumped 8.1% last month in US dollar terms, sharply beating the 1.9% rise expected by economists polled by Reuters. This jump in outbound shipments highlighted the adaptability of China’s exporters, especially as exports to the US suffered a dramatic drop.
- Exports to the US dropped over 21% year on year in April.
- Imports from the US fell nearly 14% over the same period.
- These declines reflect the impact of new tariffs imposed by both countries, with the US levying tariffs of 145% on Chinese imports, and China responding with 125% tariffs on American goods.
Interestingly, the dip came after a March surge in US-bound shipments, as Chinese exporters rushed to fill orders before tariffs hit.
Southeast Asia Trade Delivers Major Boost
While China’s exports to the US fell, trade with Southeast Asia more than filled the gap. According to customs data:
- Exports to the Association of Southeast Asian Nations (ASEAN) soared 20.8% in April, up from 11.6% growth in March.
- Notably, Vietnam and Malaysia remained the top Southeast Asian destinations for Chinese goods.
- Shipments to Indonesia jumped 37%, and those to Thailand rose 28% year on year.
This dramatic surge in Southeast Asia trade suggests that exporters are finding new markets and building stronger regional ties. Some of this rise may be due to transshipments, where goods are routed through third countries, or from contracts signed before the new tariffs. But fundamentally, it’s a sign that China’s exporters are adapting quickly to global changes.
Europe’s Trade with China Sees Mixed Results
Europe painted a mixed picture for Chinese trade.
- China’s exports to the European Union rose by 8.3% in April, while imports from the EU fell 16.5%.
- By comparison, in March, China’s EU-bound exports had risen by 10.3%, with imports down 7.5%.
These numbers highlight ongoing shifts as businesses look for stability in unpredictable global markets.
Inside the Export Surge: Data and Insights
Slower Imports and Stimulus Measures
While exports surged, imports dipped just 0.2% from a year earlier, defying expectations of a steeper 5.9% fall. The narrower decline suggests that domestic demand within China is holding up better than anticipated, but also reflects caution.
Chinese authorities have responded to recent trade friction by introducing stimulus measures. These include easing monetary policy and offering support for companies hardest hit by tariffs, aiming to cushion the economic blow and keep factories running.
Risks of Transshipment and Future Outlook
Some experts, like Zhiwei Zhang of Pinpoint Asset Management, argue that the export surge partially reflects goods routed through third countries or from legacy contracts signed before new tariffs were announced. The positive numbers may weaken in the months ahead as tariffs bite deeper.
Raymond Yeung, chief economist for Greater China at ANZ Bank, also highlighted that container vessel volumes from China to the US fell sharply toward the end of April.
Impact on Jobs and Factory Activity
There are growing worries about jobs connected to US-bound goods:
- Goldman Sachs estimates that up to 16 million jobs in China, or 2% of the labour force, are tied to the production of goods for the US market.
- The latest factory data shows that activity fell to a 16-month low in April.
- Export orders dropped to their lowest point since December 2022.
- The new purchasing managers’ index indicated employment fell across the board, as manufacturers paused production and put workers on leave.
With local governments encouraging exporters to redirect unsold goods to the domestic market, there is concern that this will push down prices at home, increasing deflationary risks.
Chinese and US Officials Seek a Breakthrough
Looking ahead, diplomacy is in the works. A high-level meeting between US and Chinese officials is planned in Switzerland, marking the first direct trade talks since the most recent tariff increases.
- While a comprehensive deal remains out of reach for now, analysts say a phased reduction in tariffs is possible if talks go well.
- Morgan Stanley’s Laura Wang suggests a gradual drawdown in tariff rates could prove a major boost for Chinese equities, though the process will likely see its share of ups and downs.
The investment bank projects that US tariffs on Chinese goods could drop to a “terminal rate” of 45% by year end if talks progress, though a lasting resolution remains uncertain.
Wall Street banks have already trimmed their forecasts for China’s GDP growth to around 4%, notably below Beijing’s 5% target, reflecting the pressure from the trade dispute.
Economic Indicators Signal Ongoing Challenge
Key data points show the challenges China now faces amidst the surge in exports and shifting trade relationships:
New inflation data, due Saturday, is likely to show continued deflation, with analysts predicting a 0.1% drop in CPI and a 2.8% decline in the producer price index.
The benchmark CSI 300 index fell 0.23% on Friday, showing investor caution.
The Chinese offshore yuan remained steady at 7.2483 per US dollar.
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