China Exports: Trump Tariffs, Booming Growth, Or Tainted Trade?

China’s General Administration of Customs reported that Chinese exports to all other countries were in February 2018 an incredible 44.5% more than they were in February 2017. Such a massive growth rate coming now has served to intensify the economic boom narrative.

A strengthening U.S. recovery is helping underpin China’s outlook as Asia’s biggest economy seeks to cut excess capacity and transition to reliance on domestic consumption rather than debt-fueled infrastructure spending.

The article quoted here, however, was referring instead to the 48.3% gain in exports China Customs recorded for February 2015. That clearly out of whack increase, like this latest one, was a pure outlier. It wasn’t treated that way, of course. Depending upon it for interpreting the direction of the Chinese and global economy was a mistake; the US headed further into a downturn that China hasn’t yet recovered from.

What happened in February 2018?

At this point, it’s impossible to determine. The easy answer would be to attribute it to President Trump’s trade and tariff threats. The administration has been talking about them seriously since the end of last year. It would be naïve to assume Chinese exporters haven’t been in a rush to push product overseas to get ahead of any possible interference.

The Custom’s data, however, show a pretty broad spread over the various major export destinations for Chinese goods. Exports to just the United States did spike by 46% and therefore do suggest this is a valid if perhaps partial explanation. We might expect exports to jump if at lesser rates to other locations for the same reason. It is still possible that Chinese firms are calculating for European and other countermoves against not just US tariffs, concerns about protectionism in general as trade becomes a global target this year for the first time.

That may be why the subcomponent for new export orders attached to the official manufacturing PMI was rising to the end of last year, and then dropped below 50 for both January and February. It would seem, by these figures, anyway, Chinese factories were a little busier than they had been for the export business, but with orders now falling they may not be going forward.