China's trade surplus with U.S. soars in first quarter but March exports falter
Sports utility vehicles (SUVs) waiting to be exported are seen at a port in Lianyungang, Jiangsu province, China April 5, 2018. REUTERS/Stringer/Files ·Reuters·Reuters
By Elias Glenn and Stella Qiu
By Elias Glenn and Stella Qiu
BEIJING (Reuters) - China's trade surplus with the United States surged nearly 20 percent in the first quarter, with some analysts speculating exporters were rushing out shipments to get ahead of threatened tariffs that are spurring fears of a full-blown trade war.
The latest readings on the health of China's trade sector are unlikely to ease tensions following weeks of tit-for-tat tariff threats by Washington and Beijing, though they suggest China's economy is still in relatively solid shape.
Even as China's trade surplus narrowed overall in the first three months of the year, its surplus with the U.S. surged 19.4 percent to $58.25 billion from a year earlier, customs data showed on Friday.
While China was busy selling more to the U.S., it was buying more from other countries, and ran a $9.86 billion deficit with the rest of the world in the quarter.
China's overall exports and imports both grew at a strong double-digit clip early in the year, and while exports unexpectedly fell in March -- resulting in a rare trade deficit -- most analysts chalked it up to seasonal factors and said it was too early to call a trend.
Still, while no hard timeline has been set by either Washington or Beijing for the actual imposition of tariffs, analysts said China's exporters may already be adapting their strategies as punitive trade measures loom.
China's first-quarter exports to the U.S. rose 14.8 percent from a year earlier, despite a 5.6 percent drop in March. Its imports from the U.S. rose 8.9 percent in the quarter and 3.2 percent in March.
That helped narrow its surplus with the U.S. in March alone to $15.43 billion from $20.96 billion in February, but that was still nearly 18 percent higher than March 2017.
"The sharp decline in March export growth after very solid performance in January and February suggests some exporters may have front-loaded exports (early) this year due to concern over the possibility of a Sino-U.S. trade war after the U.S. hiked tariffs on global imports on solar panels and washing machines," said Lisheng Wang, an economist at Nomura in Hong Kong.
"We believe export growth will slow due to yuan appreciation and rising trade tensions...China's imports could be more resilient than exports in our view as China has pledged to increase imports," Wang said.
China's total aluminium exports in March rose to their highest since June, just as the United States imposed tariffs on imports of the metal and steel on March 23.
SEASONAL EXPORT DIP IN MARCH
For the first quarter as a whole, China's exports grew a hearty 14.1 percent from a year earlier.
March shipments fell 2.7 percent, however, lagging analysts' forecasts for a 10.0 percent increase, and down from a sharper-than-expected 44.5 percent jump in February, which economists believe was heavily distorted by seasonal factors.
"Most of (the March) drop is seasonal – Chinese New Year was later than usual this year, meaning more of the holiday disruptions will have dragged into March than in 2017," Capital Economics Senior China Economist Julian Evans-Pritchard wrote in a note.
March import growth of 14.4 percent beat expectations, however, suggesting China's domestic demand may still be solid enough to cushion the blow from any trade shocks.
Analysts had expected imports to grow 10.0 percent in March, picking up from 6.3 percent growth in February.
That produced an unexpected trade deficit of $4.98 billion for the month, but such shortfalls are not uncommon for China early in the year, again likely due to holiday distortions.
For Jan-March, imports rose a strong 18.9 percent on-year.
Imports of commodities continued to lead the way in March as manufacturers replenished inventories ahead of a seasonal pick-up in demand. Shipments of copper, crude oil, iron ore and soybeans all rose from the previous month.
Analysts are still expecting China's economic growth to slow later in the year, however, as a cooling property market weighs on demand for building materials from cement to steel.
OUTLOOK CLOUDY
China's exports rode a global trade boom last year, expanding at the fastest pace since 2013 and serving as one of the key drivers behind the economy's forecast-beating 6.9 percent expansion.
But the sudden spike in trade tensions with the United States is clouding the outlook for both China's "old economy" heavy industries and "new economy" tech firms alike.
Washington says China's $375 billion trade surplus with the United States is unacceptable, and has demanded Beijing reduce it by $100 billion immediately.
In a move to further force China to lower the billions of goods trade surplus running with the U.S., Trump unveiled tariff representing about $50 billion of technology, transport and medical products early this month, drawing an immediate threat of retaliatory action from Beijing.
China's tech sector, which is key part of Beijing's longer-term "Made in China 2025" strategy to move from cheap goods to higher-value manufacturing, may be particularly vulnerable.
Hi-tech products have been among its fastest growing export segments. China exported $137.8 billion worth of high-tech products in the first quarter, up 20.5 percent on-year.
(Reporting by Elias Glenn, Lusha Zhang and Stella Qiu; Editing by Kim Coghill)
