On March 17th, 2023, a general view of the container terminal in Qianwan, Qingdao Port, a port in Shandong Province, China.
cfoto | Future Publishing | Getty Images
China's export growth rate grew slower than expected at the beginning of the year while imports plunged as imports plummeted, challenged Beijing's bid to slow domestic demand and slow US tariffs.
Exports from January to February increased 2.3% in US dollar terms from the previous year. Data from customs officials showed Friday, shooting a big picture of expectations for a 5% increase in Reuters polls.
LSEG data shows that it has achieved the slowest growth rate since exports rose just 1.5% per year in April last year.
Imports surprised the market by falling 8.4% year-on-year in the first two months of 2025. This is the most sharp drop since July 2023, LESG data shows. Analysts were hoping imports would expand by 1% year-on-year.
The sharp contraction in imports showed that “the stimulus-driven pickup of the last quarter in domestic demand has already been partially reversed,” said Julian Evans Pritchard, head of Chinese Economics at Capital Economics, in a memo.
Chinese exporters are rushing to outbound shipments on front roads, hoping for more tariffs from the second half of last year when US President Donald Trump returns to the White House.
Trump's first round of 10% tariff hikes on Chinese products came into effect on February 4th, followed by an additional 10% increase in tariffs just a month later, bringing the cumulative tax collection to 20%.
China retaliated with additional tariffs on certain US goods, including energy and agricultural products, while limiting the export of certain important minerals needed by the US.
“There is still demand for frontloading as businesses expect further mutual tariffs between the US and China,” said Gary NG, senior economist at Natixis. With higher bases coupled with rising tariffs last year, he hopes China's foreign trade will be under pressure in the coming months.
Customs has released total trading data for the first two months due to the effects of distortions from the usual slow shipment season during the New Year holidays in the month that declined in late January this year.
Despite rising tariff tensions, China's leadership this week set an ambitious growth target of around 5% this year, acknowledging the weak domestic demand this year by adjusting its inflation target to a decades lowest level.
China's total trade value fell 2.4% on the US dollar terms in the first two months of the previous year, official data showed.
The US remains the largest trading partner
Trade with the United States with China increased 2.4% in the first two months of the year, up 2.3% year-on-year, while imports increased 2.7%. The US accounts for more than 11% of China's total transactions and remains the largest trading partner on a single country basis.
Nevertheless, “we expect trade with the US to soften in the coming months unless we reach a transaction to avoid tariffs,” said Lynn Song, ING's chief economist.
A decline in imports and modest export growth have resulted in collapse in trade with other major trading partners, including the European Union, Japan and South Korea. Imports from EU countries fell 5.6%, while exports rose 0.6%.
China's exports to ASEAN, a bloc of Southeast Asian countries, rose 5.7%, while imports fell 1.3%.
Steel and rare earth exports fell by 3.9% and 0.4% per year respectively, while high-tech products and ship exports increased by 5.4% and 2.2% respectively, official data shows.
Meanwhile, imports of agricultural products in China have been significantly reduced, with imported soybeans falling by 14.8% per year. Iron ore and rare earth imports plummeted by about 30%.
Weak import data suggests that “real estate and infrastructure improvements are too mild; [buying] There are still domestic alternatives for cheaper goods and overpowered capacity,” said Natixis' Ng.
Beijing support
Pressure is on Chinese officials, freeing up stronger stimulus packages to support the domestic consumption and housing sector, reducing the economy's reliance on exports and investment.
Exports contributed almost a quarter of China's GDP last year.
When Trump began his second term, he ordered the administration to investigate compliance with trade contracts during his first presidency in 2020. The final results of the assessment will be submitted to Trump by April 1st and could be set for further tariff action.
Since last year, Beijing has been trying to use trade-in subsidies to promote consumption to encourage the purchase of selected products. In January, authorities expanded their Tradin-in program to include smartphones and more appliances.
As part of the expanded fiscal package, Chinese leaders pledged another 300 billion yuan of ultra-long special financial obligations to support consumer subsidies at this week's annual parliamentary meeting.
Friday's data release highlighted the need for Beijing to step up efforts to boost domestic demand to bring about stable growth this year, said Bruce Pan, an associate professor at Hong Kong's China University.
