China trade outlook darkens as US threatens total tariffs

Bloomberg

China’s chances of escaping the trade conflict with the US with only minor damage to its economy just got slimmer.
On September 7, US President Donald Trump doubled down on his threats to impose higher tariffs on the nation’s goods, saying he’s ready to tax all imports “at short notice”.
While economists see the immediate impact of trade tension as limited, the effect on economic confidence may be larger, warned former People’s Bank of China Governor Zhou Xiaochuan.
Trade data for August released echoed both the cause and effect of the standoff with the US — the surplus with the US rose to a record, while overall export growth slowed. A lone bright spot may be faster-than-expected import growth, signaling that domestic demand in the world’s second-largest economy is holding up for now.
“With further large-scale US tariff measures imminent, Chinese exporters will be hit hard and China’s GDP growth rate in 2019 is likely to be dented,” said Rajiv Biswas, Asia Pacific chief economist at IHS Markit in Singapore. “If the US keeps ramping up its tariff measures against China, the export sector will face a long, hard road ahead despite government measures to mitigate the impact.”
Hours before Trump’s September 7 threats, China announced measures to support some of the exporters targeted by the barrage of higher duties. The Ministry of Finance said it will raise export rebate rates for 397 goods, ranging from lubricants to children’s books, meaning that firms shipping such products abroad will pay less value-added tax. The new rates will be effective from September 15, the ministry said in a statement on its website.
Chinese exporters are feeling the pain as trade tensions between the world’s two biggest economies worsen. Data released showed that China’s trade surplus with the US widened to $31.1 billion during the month, according to Bloomberg calculations. The rise came despite exports climbing at the slowest pace since March. Shipments rose 9.8 percent in dollar terms, the customs administration said. Imports climbed 20 percent.
“Exports to the US grew at a faster pace than the previous month as exporters front-loaded orders before the additional tariffs on $200 billion Chinese goods take effect,” said Gai Xinzhe, an analyst at the Bank of China’s Institute of International Finance in Beijing. Faster US economic growth also pushed up demand, Gai said.
China though is wrestling with a policy-induced economic slowdown that’s collided with uncertainties over the impact of the trade war.