Chinese Exports Top Estimates Amid Rush to Skirt Higher Tariffs

By: | Published: November 8, 2018 11:13 AM

Exports rose 15.6 percent in dollar terms in October from a year earlier, exceeding estimates for 11.7 percent Imports surged 21.4 percent, topping the estimate of 14.5 percent.

Imports from the U.S. contracted 1.8 percent, the second contraction in a row, leaving a trade surplus of .8 billion

Chinese export growth accelerated in October as companies rushed to make shipments before higher tariffs kick in.

Exports rose 15.6 percent in dollar terms in October from a year earlier, exceeding estimates for 11.7 percent Imports surged 21.4 percent, topping the estimate of 14.5 percent. The trade surplus widened to $34 billion from a revised $31.3 billion in September Exports to the U.S. grew by 13.2 percent to $42.7 billion in October, down from a record high in the previous month. Imports from the U.S. contracted 1.8 percent, the second contraction in a row, leaving a trade surplus of $31.8 billion

Key Insights
With the U.S. set to increase the tariffs on $200 billion worth of imports from China to 25 percent in January, there is a large incentive for Chinese companies and their American customers to trade as much as possible now. “Exporters are front running the expected tariff increase to 25 percent in January,” said Iris Pang, Greater China economist with ING Bank NV in Hong Kong. “This phenomenon would last into November and December. We do not expect the sideline meeting of Xi and Trump during the G-20 would be positive. We just hope that the meeting won’t create further damage to the trade relationship.” “Exports surprised on the upside with the help of a weaker yuan and exporters rushing to ship goods ahead of 25 percent tariffs in January. Exports are likely to maintain strong performance toward the year end,” said Yao Shaohua, an economist at ABCI Securities Co. Ltd in Hong Kong. Although leaders of the two nations are expected to meet at the upcoming Group of 20 summit, and there’s has been some indication that the two sides are looking to reduce tensions, there’s no certainty for business yet that tariffs won’t rise further next year. There’s a high correlation between exports and imports in China’s trade, so the robust shipments probably has some impact on how much China buys from overseas.

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Notwithstanding the continued strong trade data, the domestic economy continues to slow, with the October reading of the manufacturing purchasing managers index missing estimates and new export orders falling to the lowest level since early 2016. Concern over the increasing downward pressures prompted the nation’s top leaders to announce further stimulus after a Politburo meeting chaired by President Xi Jinping last week.

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