Export Growth Accelerates as Firms Hedge Global Risks
China’s exports rose 5.8% in June compared to a year earlier, driven by companies racing to ship goods before a fragile tariff truce with the United States potentially collapses in August. The jump exceeded forecasts and marked an acceleration from May’s 4.8% increase, according to customs data released Monday.
Shipments to Southeast Asian countries — often used as transit hubs — were particularly strong, underscoring how Chinese manufacturers are rerouting goods in anticipation of renewed trade barriers. The pressure stems from the looming possibility that the White House could reinstate tariffs exceeding 100% if no lasting agreement is reached by August 12.
Tariff Fears Drive Market Activity and Frontloading
With over $400 billion in Chinese goods sold to the U.S. annually, exporters are actively frontloading to avoid the financial shock of reimposed duties. Exports to the U.S. grew 32.4% month-over-month, benefiting from the reduced tariffs granted in a temporary agreement reached in June. However, year-on-year exports to the U.S. remain in decline.
Economists warn this accelerated activity may be short-lived. “While frontloading ahead of the August tariff pause deadline is likely to continue, freight rates for China-bound shipments to the U.S. have started to decline,” said Chim Lee of the Economist Intelligence Unit.
Imports also bounced back, rising 1.1% after a 3.4% fall in May. The broader trade data helped buoy investor sentiment, with the CSI300 index up 0.2% and the Shanghai Composite gaining 0.4%, approaching its highest level since October.
Export Strategy Faces New Global Constraints
Despite the recent surge, analysts predict that Chinese exporters will face increasing limitations in the months ahead. New U.S. tariffs, including a 40% duty on goods rerouted through Vietnam, threaten a key transshipment strategy. Further risks arise from proposed 10% tariffs on BRICS countries, including China.
China’s rare earth exports rose 32% in June, suggesting recent agreements to ease supply restrictions may be gaining traction. However, analysts note that Chinese producers will struggle to maintain profitability if U.S. duties remain above 35%, even as they expand into neighboring and emerging markets.
“Tariffs are likely to remain high and Chinese manufacturers face growing constraints on their ability to rapidly expand global market share by slashing prices,” said Zichun Huang of Capital Economics. “We therefore expect export growth to slow over the coming quarters.”
Commodity Imports Reflect Strategic Realignments
China’s June trade surplus grew to $114.7 billion, up from $103.2 billion in May. The country also showed strong activity in commodity markets. Soybean imports reached a same-month record, driven by a surge in purchases from Brazil, which now faces 50% U.S. tariffs. In contrast, U.S. soybean imports fell to just 724,000 tons.
Crude oil imports climbed to their highest daily level since August 2023, supported by increased flows from Saudi Arabia and Iran. Iron ore imports also rose 8% month-over-month, suggesting that industrial sectors remain active despite trade tensions.
The coming weeks will be pivotal as Beijing attempts to cement a lasting trade agreement while navigating the broader implications of a global tariff war. Any failure to reach a resolution with Washington risks a renewed shock to China’s export-driven economy.
