Chinese demand for American goods has tanked — evidence that economic damage from the trade war isn’t just hurting China, but the United States, as well.
On a year-over-year basis, Chinese imports of American goods dropped by 31 percent in June. Economists say this indicates that the Chinese economy, which was already decelerating, is continuing to slow its rate of growth.
“A country’s imports are indicative of its economy. A strong economy always imports more. This weak import number is an indication of the weaker economic growth in China,” said Zhiwei Ren, managing director and portfolio manager at Penn Mutual Asset Management.
“It’s more reflective of China’s weak domestic demand,” said Jeff Ng, chief economist, Asia, at Continuum Economics, said the data reflected weaker domestic demand and slowing growth. “We expect GDP growth to stabilize at a low level in the coming quarters,” he said. “I expect growth at 6 percent in 2020. Only in the 2020s do I expect it below.
China’s first-quarter GDP growth rate was 6.4 percent, but economists polled by Reuters expect that to fall to 6.2 percent for the second quarter when the Chinese government reports it on Monday.
The sharp drop in U.S. imports also is reflective of how tit-for-tat tariffs are prompting China to shift its purchases of goods to other countries at the expense of export-dependent sectors of the American economy.
“The motivation is twofold,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics. “On one hand, yes, it’s retaliatory. A second part of the reason might be that tariffs make goods more expensive,” she said. “Buying from other countries is more attractive.”
In addition to the contraction of imports, Chinese exports to the U.S. fell by nearly 8 percent, while China’s trade surplus grew by 3 percent to roughly $39 billion.
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