China’s US trade surplus hit record in 2018 but tariffs bite

China’s trade surplus with the United States hit a record high last year but the country’s imports and exports fell in December as the long-running trade war begins to bite in the world’s number two economy, data showed Monday.

The surplus with the US is a major source of anger within the Trump administration, which imposed tariffs on hundreds of billions of dollar- worth of Chinese goods last year and has warned of more to come.

Despite the levies, exports to the United States grew 11.3 percent last year while imports rose 0.7 percent, expanding the surplus to a record $323.3 billion from $275.8 billion in 2017, customs data show.

However, in a sign that the White House’s measures are having an impact, China’s exports to the US sank last month.

The figures come after a US delegation held three days of talks in Beijing last week in the first face-to-face meeting since Donald Trump and Chinese leader Xi Jinping in December pledged a 90-day truce to resolve the crisis.

Trump wants Beijing to buy more American goods to narrow the yawning trade gap and allow foreign players better access and protection in the Chinese market.

China traditionally imports vast quantities of American soybeans in the second half of the year, long making it the most valuable import from the US.

But the buying fell off last year after China imposed a 25 percent retaliatory tariff on the commodity in the summer.

Total imports of soybeans fell 7.9 percent last year to 88 million tonnes, customs data showed, with December imports down 40.1 percent from a year earlier.

“The overall development of China-US trade in 2018 was still relatively normal, but the trade surplus did expand slightly,” said Li Kuiwen, spokesman for the customs administration.

The country’s commerce minister told state media on Friday that China will work to straighten out trade frictions with the US this year.

China’s exports to the world fell 4.4 percent in December from a year earlier, while imports dropped 7.6 percent, reflecting sluggish demand at home and abroad.

“With global growth set to cool further this year, exports will remain weak even if China can clinch a trade deal that rows back Trump’s tariffs,” said Julian Evans-Pritchard of Capital Economics.

The trade slowdown sent Chinese stocks lower on Monday.

Rapidly falling exports could point to rising unemployment, said Nomura economist Lu Ting.

“Beijing will perhaps be more eager to strike a trade deal with the US … policymakers will need to take more aggressive measures to stabilise GDP growth,” Lu wrote in a note.

China’s global trade volume rose last year but its surplus with the world fell 16.2 percent to $351.76 billion in 2018, as imports rose 15.8 percent while exports gained 9.9 percent.

The customs administration will work to “improve the country’s business environment and expand foreign trade… in order to keep employment, the financial sector, foreign trade, foreign investment” stable, Li said, adding there are some “hidden concerns” and “uncertain external factors” for development.

With US tariffs in place, the gloomy export picture has reinforced the need for Beijing to rely on its legion of consumers to grow its economy.

But a slew of bad data has added to concerns about China’s economy, which is expected to have grown around 6.5 percent in 2018, down from 6.9 percent in 2017 and at its weakest rate in almost three decades.

China’s annual passenger car sales fell last year for the first time in more than 20 years, as the trade war with the US rocked consumer confidence and Beijing reined in car financing channels.

The cost of producing goods in China’s factories slowed sharply in December, a sign demand remains weak, while consumer inflation also flagged.

Official data showed the manufacturing sector contracted in December for the first time in more than two years.