Monday’s figures showing that China’s exports grew faster than expected in September would have been welcome news for the authorities in Beijing at any time.
But three days after Donald Trump threatened to impose an extra 100 per cent tariff on Chinese goods, the numbers also suggest that China is in a relatively strong position to weather an escalation of the trade war.
China’s exports rose by 8.3 per cent in September compared with a year earlier, and versus a 4.4 per cent year-on-year increase in August.
Crucially, September’s increase came despite a 27 per cent fall in Chinese exports to the US as a result of Trump’s tariffs.
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The US president made his 100 per cent tariff hike threat last Friday in response to China’s announcement that it was expanding export controls on rare earths. The new measures mean that any company, in China or elsewhere, must get permission from Beijing to export some products in which rare earths account for more than 0.1 per cent of the value.
[ Trump unveils additional levies of 100% on China’s US-bound exportsOpens in new window ]
Beijing’s export controls, which could affect manufacturing supply chains around the world, mirror Washington’s restrictions on the export of some advanced technology, including the most powerful semiconductors. Like the US, China often invokes national security concerns when it imposes such restrictions and it has claimed that its latest measures will help to maintain world peace and regional stability.
Beijing’s move followed Washington’s announcement that it was expanding the number of Chinese companies on an export controls blacklist. China viewed the US action as a breach of an understanding agreed between their trade negotiators that neither side would introduce new restrictions while talks are continuing.
China’s tightening of its grip on rare earths, in tandem with Chinese buyers refusing to buy US soybeans, also appeared to be a display of strength ahead of an expected meeting between Trump and Xi Jinping at the end of this month.
Trump threatened on Friday to cancel that meeting, which is due to take place during a summit of Asian and Pacific countries in South Korea, although he later walked back the threat.
“Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The USA wants to help China, not hurt it!!!” he wrote on his social media site Truth Social on Sunday.
Despite Monday’s encouraging export figures, China’s economy remains fragile with domestic demand sluggish, the housing market still flat after a four-year slump and growing evidence of deflation.
And although the US now accounts for a shrinking share of Chinese exports – little more than 10 per cent on the latest figures – an escalation in the trade war could see Washington introduce other measures to damage China’s economy.
The speed with which Trump changed his tone over the weekend suggests, however, that he understands how much the US has to lose if negotiations with China go off the rails. Earlier this year, when China restricted exports of rare earths magnets, some US car plants had to temporarily halt production.
The latest move from Beijing signals that China could go much further and have more devastating consequences for US manufacturing, as treasury secretary Scott Bessent acknowledged on Monday.
“This is China versus the world — they have pointed a bazooka at the supply chains and the industrial base of the entire free world, and we’re not going to have it,” he told Fox Business.
He added that he believed the meeting between Trump and Xi will go ahead later this month, a signal that both sides want to avoid a breakdown in negotiations after the turbulence of the past few days.
