Welcome to the 214th edition of Trade War.
China’s exports unexpectedly grow in May. EU prepares to levy tariffs on Chinese electric vehicles and China’s commerce minister threatens retaliation. Brazil to be a case study for absorbing Chinese EVs.
“Their economy is booming? Give me a break,” says US President Joe Biden. China is inclined “to export its way out, which is not going to happen. The world is not going to accept it,” says Nobel Laureate Paul Krugman on Bloomberg TV. And expatriates aren’t going back to China, post-Covid.
Seed and pesticide giant Syngenta struggles with national security concerns over its Chinese ownership. And the most-downloaded US news app NewsBreak has Chinese roots and an AI accuracy problem.
Notable/In depth
Biden and Trump both deep believers in Chinese tariffs
China to add more new chip production than the rest of the world combined
The PRC’s substantial election interference in Taiwan includes “information manipulation, including outright disinformation”
Good news for China: exports up
China exports grew for a second month in May, up 7.6 percent, higher than expected and good news for Beijing as it struggles to find a plank to support economic growth. But in a sign of still weak consumer spending, imports only grew by 1.8 percent, far slower than the 8.4 percent registered a month earlier.
“Headline export numbers are surprisingly good, and that confirms the underlying trend, volumes are running very high,” says Frederic Neumann, chief Asia economist at HSBC.
Still, the recovery is vulnerable to fast-proliferating tariffs on Chinese exports and China’s economy is not sustainable longer term without much stronger domestic demand.
One area where China products are selling well: high tech exports, with, for example, overseas shipments of integrated circuits up 28.4 percent year-on-year in May, according to Reuters calculations. Vehicle exports, including chassis sales, were up by 16 percent. Steel is also growing strongly, in part due to excess domestic capacity from China’s multi-year real estate malaise.
“We expect exports to stay strong in the coming months, supported by a weaker real effective exchange rate. Foreign tariffs are unlikely to immediately threaten exports," predicts Zichun Huang, China economist at Capital Economics.
“China’s competitive goods are commanding a bigger share in the global market,” says Bruce Pang, chief economist for Greater China at Jones Lang LaSalle.
For now, Chinese exporters are “continuing to front-load shipments or re-route exports via a third country” to avoid tariffs, Pang adds.
“Boosted by exports of high-end, intelligent, and environmentally friendly products, as well as the steady expansion of imports, the monthly foreign trade growth rate has further accelerated,” said Lyu Daliang, director of the General Administration of Custom's Department of Statistics and Analysis, reported Xinhua News Agency. ”China's economy has been continuously improving since the beginning of the year, with a sustained recovery and positive momentum in foreign trade.”
While exports and imports with the U.S. and EU fell, trade with the Association of Southeast Asian Nations (ASEAN) grew by 4.1 percent from January through May. ASEAN is China’s largest trading partner, accounting for 15.8 percent of total foreign trade.
According to the International Monetary Fund, last year saw 3,000 trade restrictions imposed globally, up from 1,000 in 2019.
EU tariffs on Chinese EVs imminent
The EU is preparing to announce tariffs on Chinese electric vehicles, first privately informing car makers later this month then making an official announcement on preliminary tariffs on July 4th. That would be followed in November by the imposition of final levies.
Affected companies include BYD, the world’s largest EV maker, SAIC Motor, and Geely, as well as Western makers including Tesla and BMW that produce in China.
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