CChina and America are clearly feeling their trade war: Trade between the two largest economies plummeted by 14.6 percent last year, as Chinese customs officials said in Beijing on Tuesday when the figures were calculated in US dollars. China’s imports from the United States even fell 20.9 percent to $ 122 billion, while China’s exports to America dropped 12.5 percent to $ 418 billion.
After two years of double-digit growth rates, total Chinese foreign trade with the world fell by one percent for the first time last year. Exports grew only slightly by 0.5 percent overall, but imports fell by 2.8 percent.
However, there was a bright spot for China: All foreign trade recovered in December and rose by 11.3 percent compared to the same month in the previous year. Imports rose 16.3 percent in December, while exports rose 7.6 percent. Experts partly attributed the increase to low comparative figures.
The trade figures were presented one day before the planned signing of the partial agreement on the first phase of the trade war in Washington on Wednesday. China’s chief negotiator and Vice Premier Liu He traveled with a large delegation. Among other things, according to the Americans, China is committed to increasing its imports from the United States by $ 200 billion over two years.
Of this, at least $ 40 billion will benefit American farmers – an important group for US President Donald Trump with a view to the November election. China is also said to have agreed to buy finished goods for around $ 75 billion, energy for $ 50 billion and services for $ 35 to 40 billion, Politico reported.
There should also be agreements on intellectual property, technology transfer and exchange rates. In return, the United States waived the threat of new punitive tariffs on consumer goods worth $ 150 billion in December. However, the 25 percent special levy on goods worth $ 250 billion that has been imposed since 2018 should remain.
Pressure on the government in Beijing
However, additional 15 percent tariffs on Chinese goods worth $ 120 billion are to be halved. Trump sees the existing punitive tariffs as trump cards for the negotiations for a second phase agreement. In his view, a new deal could only come after the presidential election in November.
The trade war weighs heavily on China’s economy. “The tariffs already levied by the United States have hit China’s exports,” said economist Max Zenglein from the China Institute Merics in Berlin. “Because the USA is one of the most important sales markets for the country, this is increasingly depressing overall exports.”
The decline in imports can be explained primarily by the slower growth in China, which should reach a little more than six percent this year. “As a result, fewer foreign products were in demand from both industry and consumers.” In addition, the weaker exchange rate of the yuan against the US dollar would have made foreign goods more expensive in 2019 and slowed demand.
Even if foreign trade is no longer as important for China’s economy compared to the past, “export is of great importance for parts of the manufacturing industry,” emphasized Zenglein. A slump in foreign trade could slow economic growth “faster and faster than the government would like”.
It could also lead to rising unemployment in export-dependent regions. “This increases the pressure on the government,” said Zenglein. The government is trying to support companies with tax breaks and social security cuts. Beijing is also trying to strengthen trade with the Southeast Asian countries.