China’s exports unexpectedly returned to growth in May despite higher U.S. tariffs, but imports fell the most in nearly three years in a further sign of weak domestic demand that could prompt Beijing to step up stimulus measures. Some analysts suspected Chinese exporters may have rushed out shipments to the United States to avoid new tariffs on $300 billion of goods that President Donald Trump is threatening to impose in a rapidly escalating trade dispute. But Monday’s better-than-expected export data is unlikely to ease fears that a longer and costlier U.S.-China trade war may no longer be avoidable, pushing the global economy towards recession.
China’s May exports rose 1.1% from a year earlier, compared with market expectations for a modest decline, customs data showed. “We expect export growth to remain positive in June, likely supported by continued front-loading of U.S.-bound exports, but it should then tumble in the third quarter, when we expect the threatened tariffs to be imposed,” economists at Nomura said in a note to clients.
“Therefore, we believe Beijing will likely step up its stimulus measures to stabilize financial markets and growth.”Business distortions related to April’s cut in the value-added tax (VAT) may also have eased, helping export readings, Nomura added. Analysts polled by Reuters had expected May shipments from the world’s largest exporter to have fallen 3.8% from a year earlier, after a contraction of 2.7% percent in April.