Tariff crossfire cools China’s export engine as US orders plunge

China’s export machine downshifted in August, with growth cooling to the slowest pace in six months as tariff tensions with Washington bit hard and buyers in America pulled back.

Official data show exports rose 4.4% year-on-year—a miss versus economists’ expectations and a clear step down from July’s 7.2%. Imports also lost steam, up just 1.3% after 4.1% in July. The headline still masks a split picture: shipments to the US slumped 33%, while sales to Southeast Asia jumped 22.5% as Chinese manufacturers hustled to diversify away from their most politically volatile market.

What’s driving the slowdown:

• Tariff whiplash: President Donald Trump announced another 90-day pause on sweeping new China tariffs in mid-August—hours before the last truce expired—but the uncertainty is the point. The White House has floated duties as high as 245% on Chinese goods; Beijing has threatened retaliatory tariffs up to 125%.
• Baseline costs rising: Many Chinese imports face a 10% base tariff plus an extra 20% levy tied to fentanyl allegations, with some items taxed even higher. That’s made American orders unpredictable—and pricey.
• Policy pivot: Beijing is nudging exporters toward ASEAN, Africa and other emerging markets to dull US exposure. It’s working to a degree, but nothing matches US buying power.

The numbers that matter:

• Exports: +4% y/y (slowest since February)
• Imports: +3% y/y
• To U.S.: –33% y/y
• To Southeast Asia: +22.5% y/y
• Trade surplus: $102.3bn (July: $98.2bn; June: $114.8bn)

Analysts say the cushion from non-US markets reduces the urgency for a big-bang fiscal bazooka, though many are watching the fourth quarter for targeted support to revive soft domestic demand.

China’s surplus widened again in August, helped by weaker imports and resilient non-US exports. But with the US buying less and prices under pressure, factory margins remain tight. Policymakers are trying to keep growth near the ~5% target without overusing fiscal firepower, relying instead on credit from policy banks and selective monetary easing.

Germany, Europe’s export bellwether, added to the cautionary mood. July exports fell 0.6% m/m (consensus looked for a small gain) and imports slipped 0.1%, trimming the trade surplus to €14.7bn (June: €15.4bn; July 2024: €17.7bn). A silver lining: industrial production rose 1.3%.

Crude prices edged up as OPEC+ agreed to slow the pace of output increases from October on weaker demand expectations—while potential new sanctions on Russia loomed after fresh strikes in Ukraine. Brent added 1.5% to $66.45 a barrel. Eight OPEC+ members will lift output by just 137,000 bpd in October, far below recent 411,000–555,000 bpd monthly hikes.

China can keep shipping more to the rest of the world, but as long as tariff uncertainty hangs over the US market—and domestic demand stays soft—export growth is likely to remain choppy, not roaring.

(1$ = 0.85€)

With input from Bloomberg, Reuters, and the Guardian.