China’s imports unexpectedly declined during the January- February period, while exports also slowed, as rising tariff pressures from the United States dampened the recovery of the world’s second-largest economy.
The first two months of the year marked the beginning of a renewed US-China trade war, with US President Donald Trump imposing an additional 10% tariff on Chinese goods, citing China’s insufficient efforts to curb the flow of the opioid fentanyl.
This put an end to exporters' attempts to accelerate shipments before the new restrictions, while production also slowed as Chinese workers took time off for the Lunar New Year festival.
Analysts suggest that the drop in imports indicates Beijing has started reducing its purchases of essential commodities in preparation for four more years of challenging trade tensions under the second Trump administration.
“The drop in imports is seen across grains, iron ore and crude oil, and could be related to China's own consideration of building strategic reserves,” stated Xu Tianchen, senior economist at the Economist Intelligence Unit.
“China may have imported too many of them in 2024, and needs to scale back the purchase volume. This is certainly true for iron ore, as steel production clearly exceeds what is needed by the economy,” he added.
Export momentum had been a positive aspect for an economy otherwise hindered by weak household and business confidence, largely due to a prolonged property market debt crisis, Reuters reports.
Customs data released on Friday revealed that imports dropped 8.4% year-on-year, falling short of the 1% growth predicted in a Reuters poll of economists and a 1% increase in December.
Exports from the world’s largest manufacturing nation increased by just 2.3% during the same period, falling short of the expected 5% rise and slowing down from December’s 10.7% growth.
In addition, China’s customs agency releases combined trade data for January and February to account for distortions caused by the shifting timing of the Lunar New Year, which took place between 28th January and 4th February this year.
“(Slowing exports) may be partly due to the slowdown of export front loading, which was strong late last year to avoid the trade war,” according to Zhang Zhiwei, chief economist at Pinpoint Asset Management.
“The sharp decline of imports may reflect both weak domestic demand as well as a decline in imports for processing trade,” he added.
“The damage of higher US tariffs on China's goods will likely show up next month.”
Imports by state-owned enterprises fell by 20.6%, while private firms saw a 2.7% increase, according to customs data. This suggests that the world’s largest commodities importer is increasingly relying on stockpiles, with state-backed buyers playing a dominant role in the market.