China’s exports growth slowed more than expected at the start of the year while imports plunged, as lackluster domestic demand and U.S. tariffs challenge Beijing’s bid to bolster sluggish growth.
Exports in the January to February period rose 2.3% in U.S. dollar terms from a year earlier, data from the customs authority showed Friday, significantly undershooting expectations of a 5% increase in a Reuters poll.
That marked the slowest growth since April last year when exports increased by just 1.5% on year, according to LSEG data.
Imports surprised markets by declining 8.4% year-on-year in the first two months of 2025, the sharpest fall since July 2023, LESG data showed. Analysts had expected imports to expand 1% year-on-year.
The sharp contraction in imports showed the “last quarter’s stimulus-led pick-up in domestic demand has already partially reversed,” Julian Evans-Pritchard, head of China economics at Capital Economics, said in a note.
Chinese exporters have been rushing to front-load outbound shipments since late last year on anticipation of more tariffs as U.S. President Donald Trump returned to the White House.
Trump’s first round of 10% tariff hikes on Chinese goods took effect on Feb 4., followed by another 10% tariff increase kicking in just one month later, taking the cumulative levies to 20%.
China has retaliated with additional tariffs on select U.S. goods, including energy and agricultural products, while restricting exports of certain critical minerals that the U.S. needs.
“As firms expect further mutual tariffs between the US and China, there is still some demand for front-loading,” said Gary Ng, senior economist at Natixis. Due to a higher base last year, coupled with rising tariffs, he expects China’s foreign trade to remain under pressure in the coming months.
The customs agency publishes combined trade data for the first two months due to the distorting effects from the typically slow-shipment season during Lunar New Year holidays, which fell in late January this year.
Despite the mounting tariff tensions, Chinese leadership this week set an ambitious growth target of around 5% this year while acknowledging the weak domestic demand by adjusting the inflation target to the lowest level in decades.
China’s total trade values slumped 2.4% in U.S. dollar terms in the first two months from a year earlier, official data showed.
U.S. remains largest trading partner
China’s trade with the U.S. was up 2.4% in U.S. dollar terms in the first two months of the year, with exports up 2.3% year-on-year and imports up 2.7%. The U.S. remains its largest trading partner in a single-country basis, accounting for over 11% of China’s total trades.
Nevertheless, “unless a deal is reached to avert tariffs, trade with the US is expected to soften in the coming months,” said Lynn Song, chief China economist at ING.
The country’s trade with other major trading partners including the European Union, Japan and South Korea slumped, due to falling imports and modest exports growth. Imports from EU nations declined 5.6%, while exports grew 0.6%.
China’s exports to ASEAN, a bloc of Southeast Asian nations, rose 5.7% and imports fell 1.3%.
The exports of steel and rare earth dropped 3.9% and 0.4% on year, respectively, while that of high-tech products and ships grew 5.4% and 2.2%, respectively, official data showed.
Meanwhile, China’s imports of agricultural goods scaled back significantly, with imported soybeans decreasing 14.8% on year. Imports of iron ore and rare earths plunged roughly 30%.
The weak import data showed that any “improvement in real estate and infrastructure is too mild and the trend of [buying] domestic substitutions for cheaper goods and overcapacity remains,” Natixis’ Ng said.
Beijing’s support
Pressure has been building on Chinese officials to release more forceful stimulus measures to prop up domestic consumption and the housing sector, while reducing the economy’s reliance on exports and investment.
Exports contributed nearly a quarter of China’s GDP last year.
As Trump started his second term, he ordered his administration to investigate Beijing’s compliance with a trade deal struck during his first presidency in 2020. The final result of the assessment will be delivered to Trump by April 1, potentially setting the stage for further tariff actions, economists said.
Since last year, Beijing has sought to boost consumption using trade-in subsidies to encourage purchases of select goods. Authorities in January expanded the trade-in program to include smartphones and more home appliances.
As part of an expanded fiscal package, Chinese leaders pledged at an annual parliamentary meeting this week an additional 300 billion yuan of ultra-long special treasury bonds for consumers’ subsidy support.
Friday’s data release underscored the need for Beijing to step up efforts on boosting domestic demand to deliver a stable growth this year, said Bruce Pang, adjunct associate professor at Chinese University of Hong Kong.
Source: CNBC