China's May Exports Hampered by US: "Largest Drop Since Pandemic"

China's Exports Rise 4.8% in May, Missing Expectations
Exports to the US Estimated to Drop by 34%
Exports to Vietnam Continue to Increase
"Third-Country Rerouting Suspected"

A miniature figure of US President Donald Trump made against the background of the Chinese national flag. Photo by Reuters Yonhap News

Although the US-China tariff war entered a temporary truce in mid-May, China's exports last month increased by 4.8%, falling short of market expectations. The overall growth in exports was also limited as exports to the United States plummeted to levels comparable to the early days of the COVID-19 pandemic.

According to Reuters on June 9, China's General Administration of Customs announced that exports in May reached $316.1 billion, a 4.8% increase from the same month last year in dollar terms. This figure falls short of the forecasts by Reuters (5.0%) and Bloomberg (6.0%).

Imports for the same month amounted to $212.88 billion, a 3.4% decrease compared to the same period last year. Reuters had projected a 0.9% decrease. As a result, the total trade volume expanded by 1.3% year-on-year, and the trade surplus reached $103.22 billion.

The slowdown in China's key growth driver?exports?was due to a decline in exports to the United States. The Financial Times (FT) of the UK, based on its own calculations, reported that China's exports to the US in May decreased by 34% year-on-year, a sharper drop than the 21% decline in April. Bloomberg also estimated that China's exports to the US fell by 34.4%. Bloomberg noted, "This is the largest decline since the economic shutdown at the onset of the pandemic in February 2020." The report also highlighted that the aftereffects continued even after the US and China entered a temporary truce following the tariff relief agreement reached in Geneva, Switzerland, on May 12.

Exports to regions other than the US, such as the European Union (EU) and the Association of Southeast Asian Nations (ASEAN), were estimated to have increased by 11%. Notably, China's exports to Vietnam surged by 22%, exceeding $17 billion for three consecutive months. Bloomberg interpreted this as a result of Chinese companies' third-country rerouting export strategies to circumvent US tariffs, and pointed out, "This trend is widening the US trade deficit with Vietnam." Consequently, it is expected that ongoing US tariff negotiations with Vietnam and other countries will become more complicated in the future.

Meanwhile, according to the New York Times (NYT), senior officials from the US and China are scheduled to hold a second round of economic talks in London, UK, on June 9 and 10. The US delegation will include Treasury Secretary Scott Besant, Commerce Secretary Howard Lutnick, and US Trade Representative (USTR) Jamison Greer. On the Chinese side, Vice Premier He Lifeng, who is in charge of economic affairs, is expected to lead the negotiations.