China’s trade surplus with the U.S. was little changed last year, even as the Asian nation’s overall surplus fell 14%, adding further ammunition to incoming U.S. President Donald Trump’s case against unfair Chinese competition.
China exported $250.8 billion more to the U.S. than it imported, accounting for 50% of the country’s total 2016 trade surplus of $509.96 billion, according to data released on Friday by the General Administration of Customs. That’s almost double China’s surplus with the European Union, its second-biggest trading partner, and up from 44% in 2015.
For the full year 2016, China’s global trade surplus narrowed by 14% from a record $594.50 billion the previous year, and while the gap with the United States also shrank, it was by a far more modest 2.4%, according to Chinese data.
Trade tensions between the U.S. and China have been increasing for months, and not only through the rhetoric of President-elect Trump, who has threatened to impose tariffs of up to 45% on Chinese imports and label China a currency manipulator. He has chosen several China hawks for key trade posts in his administration, including Robert Lighthizer as U.S. Trade Representative and Peter Navarro as head of a new National Trade Council.
The Obama administration has also been in action and this week announced its 16th and final complaint to the World Trade Organization against China – an objection to Chinese government subsidies to aluminum producers.
China has not been idle either. Just this week, it imposed anti-dumping tariffs of as high as 53.7% on a U.S. animal-feed ingredient known as DDGS. According to the U.S. Grains Council, China accounts for about 30% of the U.S. export market for the product.
The temperature is rising, with China’s state media warning earlier this month that any attempt by Trump to boost trade tensions or start a trade war will be met with “big sticks”. Trump has chosen several China hawks for key trade posts in his administration, including Robert Lighthizer as U.S. Trade Representative and Peter Navarro as head of a new National Trade Council.
Analysts at Australia & New Zealand Banking Group said Trump’s stance toward China could bring about long-term structural weakness in China’s exports.
“Trump’s trade policy will likely motivate U.S. businesses to move their manufacturing facilities away from China, although the latter’s efforts in promoting high-end manufacturing may offset part of the loss,” ANZ economists Betty Wang and Raymond Yeung wrote in a note on Friday.
The Chinese leadership and government officials have also highlighted the negative impact any trade war started by President-elect Trump would have, not only on China and the U.S. but also on global trade.
At a briefing on Friday, Huang Songping, a spokesman for the customs administration, said China is closely monitoring Trump’s trade policies, although he also tried to put a positive spin on China’s relationship with the United States.
Chinese President Xi Jinping is scheduled to speak at the opening of the World Economic Forum in Davos, Switzerland on Jan. 17 and will promote “inclusive globalization,” the Chinese Foreign Ministry has said. Chinese media have reported that the Chinese delegation may meet representatives of the Trump administration at the WEF to discuss bilateral issues.
Uncertainty over Trump’s policies toward China is muddying the outlook even further for trade this year.
Asia’s largest economy will “not be spared” from the impact of rising protectionism and tepid global economic growth which has prompted the World Trade Organization to lower its expectations for trade expansion this year, Huang, from the customs administration, said on Friday.
The Ministry of Commerce (MOFCOM) has abandoned efforts to set an annual target for trade growth for the second year running in view of the uncertain outlook.
At a briefing this week, ministry spokesman Sun Jiwen said there needs to be a change of mindset away from focusing on numbers and speed. He also warned that China’s foreign trade conditions would be “complex and severe” this year as external demand remained weak and trade protectionism continued to grow.
Nevertheless, Ma Jun, the head of the research bureau at the People’s Bank of China, said last month that he expected exports to return to growth in 2017 as the global economy recovers while imports will increase on the back of rising commodity prices.
China International Capital Corp., a Beijing-based investment bank, said after the December trade data release that while there are uncertainties, it expects better external demand for China in 2017, pointing to the export orders index in China’s manufacturing PMI and continued recoveries in the economies of the U.S. and Eurozone.
Louis Kuijs, China economist at Oxford Economics in Hong Kong, said the headline trade data for December masked a “significant improvement” in the three-month moving average momentum of monthly seasonally adjusted trade volumes.
“Combined with rising trade prices, this sets us up for solid headline trade data in the first quarter of 2017, especially on the import side,” he wrote in a note. “The export data indicates improved sequential global demand momentum, while the import data reflects well on domestic demand, for now.”
December exports in dollar terms fell by 6.1%, compared with the median estimate for a decline of 3.5% y/y in a Market News International survey of 18 economists. Imports rose by 3.1% y/y, only the third month in 2016 that saw an increase, and compared with the median estimate in MNI’s survey for a rise of 3.5% y/y.
The customs bureau late last month revised its initial numbers for November released on Dec. 8, with exports revised to a fall of 1.6% y/y from an initial increase of 0.1% y/y. November’s import performance was revised to a gain of 4.7% y/y from an initially reported increase of 6.7%.
The value of imports in dollar terms was boosted by higher commodity prices and import volumes.
China imported 36.38 million tonnes of crude oil in December, up 12.5% from 32.35 million tonnes in November, according to customs data.
“Better domestic demand and price factors led the rise of imports, especially when the Chinese New Year is approaching,” said Xie Yaxuan, economist with China Merchants Securities, in a note.
“But trade conflicts between China and the U.S. will increase after Donald Trump takes office, which will influence future trade performance,” Xie added.