Photographs by AP/Chinatopix
Workers make swimming suits last week in a factory in Jinjiang, China. China announced Wednesday that it would impose 25 percent punitive duties on $16 million of U.S. goods after the Trump administration announced similar duties on Chinese goods Tuesday.
Thursday, August 9, 2018
BEIJING -- China's exports to the United States surged last month as companies rushed to fill orders ahead of a jump in U.S. tariffs on Chinese goods.
Shipments from China to the U.S. climbed 13 percent in July from a year earlier, to $41.5 billion, after a roughly similar rise in June, customs data show.
At the same time, Beijing's trade surplus with the U.S. -- a frequent source of anger and threats from President Donald Trump -- grew 11 percent to $28 billion.
Chinese exporters appear to be trying to ship their goods to the United States before tariffs that Trump is imposing in a fight over technology policy take full effect. The trade war between the world's two biggest economies has forced many multinational companies to reschedule purchases and rethink where they buy materials and parts to try to dodge or blunt the effects of tit-for-tat tariffs between Washington and Beijing.
Beijing has warned that its exporters face "rising instabilities" after Washington imposed 25 percent duties on $34 billion of Chinese goods last month in response to complaints that China steals technology or pressures foreign companies to hand it over. Beijing has retaliated against the U.S. tariffs with higher duties on a similar amount of American goods.
On Tuesday, the Trump administration announced that it would proceed with previously announced 25 percent tariffs on an additional $16 billion of Chinese imports starting Aug. 23. On Wednesday, China hit back by saying it would impose identical 25 percent punitive duties on $16 billion of U.S. goods, including cars, crude oil and scrap metal, also to take effect Aug. 23.
A Commerce Ministry statement labeled Trump's decision to go ahead with the latest U.S. tariffs "very unreasonable." Beijing's retaliatory move was a "necessary response" to "safeguard its legitimate interests," the ministry said on its website.
Escalating its tensions with Beijing, the Trump administration has also threatened to impose penalties on an additional $200 billion in Chinese exports to the United States. Beijing says it is ready to retaliate against $60 billion of American imports. (Beijing cannot tax an equal amount of U.S. products, because the United States exports far fewer goods to China than it imports.)
Tariffs are taxes on imports. They are meant to protect homegrown businesses and put foreign competitors at a disadvantage. But the taxes also exact a price on domestic businesses and consumers who buy imports and end up paying more for them.
In July, China's global exports surged 12 percent, even faster than an 11 percent increase in June. At the same time, overall imports to China jumped 27 percent last month.
A WEAKENING YUAN
Exports to the rest of the world might have been boosted by a weaker Chinese currency. The yuan has declined by 8 percent this year against the dollar and by about 4 percent against a basket of global currencies. A weakening currency makes a nation's goods more affordable for overseas buyers.
China's trade conflict with the United States, coupled with weakening global demand, has compounded the challenges for Beijing. Economic growth has slowed since regulators tightened controls on bank lending to rein in surging debt.
The unusually strong July import figures reflected higher prices, according to Julian Evans-Pritchard of Capital Economics.
"We expect export growth to cool in the coming months, though this will primarily reflect softer global growth rather than U.S. tariffs," Evans-Pritchard said in a report. "Import growth is likely to slow as domestic headwinds continue to weigh on economic activity."
China's global trade surplus narrowed by 40 percent from a year earlier to $28 billion. In the meantime, its trade gap with the 28-nation European Union contracted 8 percent to $11.2 billion.
China is running out of American goods to hit with retaliatory tariffs given the two nations' lopsided trade balance. Last year's imports from the United States totaled about $130 billion. That leaves only about $20 billion for penalty tariffs after increases that have already been imposed or threatened on U.S. goods are counted.
Beijing has stepped up efforts, so far without success, to recruit governments including Germany and France as allies. Those nations have criticized Trump's tactics, but they share U.S. complaints about Chinese industrial policy and market barriers.
But beneath the acrimony, two potential paths for China seem to be emerging, according to participants in the trade negotiations and their advisers. Both would deliver trade wins for Trump and his more moderate advisers, while also letting President Xi Jinping of China push ahead with his ambitious industrial plan to build national champions in cutting-edge technologies.
A stalemate appears the most likely endgame, with new U.S. and Chinese tariffs staying in place for months or even years.
SUPPLY CHAIN ANGST
While the policies have drawn loud complaints from U.S. companies that have become reliant on imports from China, they have been forcing multinationals to rethink their supply chains and start moving them away from China. Over time, such changes could reduce the trade deficit between the two countries and limit national-security concerns, two big sources of discontent for Trump.
A negotiated truce is also possible. Although the two sides remain far apart, Beijing has made subtle shifts to a more conciliatory position. China now appears willing to discuss changes to its strategic plan, Made in China 2025, which the Trump administration has identified as a long-term threat to big U.S. industries like aircraft manufacturing, semiconductors and pharmaceuticals.
China's stance now is that a resolution of trade tensions must not block its further economic progress, but adjustments to Made in China 2025 could happen. Wednesday's trade figures showing surging Chinese exports could give Beijing some confidence.
"The red line is China's right to develop, not the concrete industrial policies and measures regarding Made in China 2025," said He Weiwen, a former Commerce Ministry official who remains one of China's top trade experts.
Hundreds of Western companies already have been reconsidering China's role in their supply chains, according to several people involved in such decisions. Executives are increasingly looking for ways to transfer the final assembly of goods to factories outside China, mainly in low-wage countries elsewhere in Asia or in Mexico.
Doing the final assembly outside of China will allow companies to bypass the new U.S. tariffs. It could also start to cut the deficit with China over the next couple of years.
But these moves may not do much to the overall trade deficit of the United States, rearranging it instead to other countries. Companies are just relocating the last steps in production plans to places like Indonesia and Taiwan rather than locating them in the United States, where blue-collar labor is costly. Beijing also will retain a lot of leverage, given that the manufacturing of a long list of components, from wires and screws to electric motors and digital controls, will most likely remain in China.
Information for this article was contributed by Joe McDonald and Paul Wiseman of The Associated Press and by Keith Bradsher of The New York Times.
A Section on 08/09/2018
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