China's Exports and Imports Surge Amidst Trade War Truce with the U.S.

During a lunch break on August 7, a man walked past the tall China Zun Tower and various office buildings in Beijing's central business district. Recent data indicates that China’s exports rose by 7.2% in July year-over-year, while imports surged at their highest rate in a year, largely due to businesses taking advantage of a truce in the ongoing trade war initiated by President Donald Trump with Beijing. However, analysts have pointed out that this rise in exports and imports is somewhat misleading, as it is influenced by a comparatively low performance in July 2024.

Notably, exports to the United States plummeted nearly 22% year-on-year, alongside a 19% decline in imports from America. In contrast, Chinese exports to Africa and Southeast Asia saw double-digit increases, indicating a strategic shift as businesses found new markets for their goods. In a further development, a significant trade surplus of $683.5 billion was reported for China by the end of July, showing nearly a 33% increase from last year’s figures for the same period. The surplus specifically for July stood at $98.2 billion, with exports to the U.S. totaling $23.7 billion lower than its imports of American goods.

The import duties on Chinese products in the U.S. have been set at a minimum of 30%, with certain items facing much steeper tariffs. Although Trump previously suggested tariffs could rise to as much as 245%, a temporary halt was agreed upon to facilitate ongoing trade discussions, although it remains uncertain if this truce will last past the August 12 deadline following recent negotiations in Sweden.

Additionally, the Trump administration has heightened tariffs on imports from other countries suspected of shipping products through China, for instance, raising fees on Vietnamese exports to the U.S. to 20%, and in some cases to 40% for transshipped goods. Zichun Huang from Capital Economics noted in a report that with the initial demand boost from the trade truce diminishing and the rising tariffs imposed on redirected shipments, China's exports are anticipated to face ongoing challenges in the near future.

While economists had predicted less than 6% growth for dollar-denominated exports in July, the overall trade rebound has somewhat mitigated the negative impacts of the trade war. Imports rose by 4.1% from the prior year, the highest growth since July 2024, driven by increased shipments of crude oil, copper, and soybeans. In a critical aspect of the trade negotiations, rare earth exports—essential for many high-tech products—fell by 17.6% in July but had previously shown a staggering decline of nearly 50% in the preceding month; year-to-date comparisons illustrate a 24.2% drop in dollar value, even as volumes rose by more than 13%. There has also been notable growth in the exports of vehicles, fertilizers, ships, and auto parts.