China’s December exports beat estimates as higher US tariffs loom

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China’s exports in December grew at a faster pace than expected, as factories rushed to fill orders to beat higher tariffs threatened by US President-elect Donald Trump once he takes office.

Exports rose 10.7% from a year earlier, according to official customs data released on Monday. Economists had forecast they would grow about 7%. Imports rose 1% year-on-year. Analysts had expected them to shrink about 1.5%. With exports outpacing imports, China’s trade surplus grew to $104.84bn (€102.57bn).

Higher tariffs on the horizon

Trump has said he will raise tariffs on Chinese goods and close some loopholes that exporters now use to sell their products more cheaply in the US. If enacted, his plans would be likely to raise prices in America and squeeze sales and profit margins for Chinese exporters.

China’s exports are likely to remain strong in the near-term, said Zichun Huang of Capital Economics, as businesses try to “front-run” potentially higher tariffs.

“Outbound shipments are likely to stay resilient in the near-term, supported by further gains in global market share thanks to a weak real effective exchange rate”, she wrote in a note.

Chinese exports to the US jumped 15.6% in December compared with the same time last year, while exports to the European Union jumped 8.8%. Outbound shipments to Southeast Asia grew almost 19%.

But exports are expected to weaken later in the year if Trump follows through on his threat to impose tariffs, Huang said.

Record exports and total trade

Officials who briefed reporters in Beijing said the total value of China’s imports and exports reached a record 43.85tn yuan (around €5.9tn), up 5% from a year earlier. China is the world’s largest exporter and the main trading partner of more than 150 countries and regions, said Wang Lingjun, the Customs Administration’s deputy director general.

China’s economy has slowed following the pandemic, partly because of job losses and a downturn in the housing industry, while exports have surged. Under leader Xi Jinping, the ruling Communist Party is promoting the upgrading of factories and a shift to more high-tech manufacturing.

This latest report said China’s export of mechanical and electrical products increased by almost 9% last year from a year earlier, with growth in exports of “high-end equipment” jumping more than 40%.

Exports of electric vehicles rose 13%, exports of 3D printers jumped almost 33% and shipments of industrial robots surged 45%. E-commerce trade, including sales by companies including Temu, Shein and Alibaba, registered 2.6tn yuan (€342bn), more than twice the level in 2020.

What about imports?

China does not pursue a trade surplus and wants to increase its imports, the officials said. But while imports edged higher last year, they were still behind exports, partly due to lower prices for key commodities such as oil and iron ore.

Slowing imports also reflected weak demand as consumers and businesses cut back on spending.

“Regarding this year’s imports, we believe that there is still a lot of room for growth. This is not only because my country’s market capacity is large, there are many levels, and it has huge potential”, said Lv Daliang, a Customs Administration spokesperson.

China is also blocked from exporting and importing some products due to trade restrictions, Lv said, referring to controls by the US and some other countries on strategically sensitive exports to China, such as sales of advanced semiconductors and items that can be used for military purposes.

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“In addition, some countries politicise economic and trade issues, abuse export control measures, and unreasonably restrict the export of some products to China, otherwise we will import more”, he said.

Where are the exports going?

The officials emphasised China was making particular efforts to expand trade with countries participating in its “Belt and Road” initiative to expand infrastructure construction and trade across much of the globe. Trade with those countries accounted for about half of China’s total trade last year.

China has completely eliminated tariffs on imports from the world’s poorest countries, they noted.

But China also values trade with traditional markets such as Europe and the United States, and two-way trade with the US grew nearly 5% last year.

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“We imported agricultural products, energy products, medicines, and aircraft from the United States, and exported clothing, consumer electronics, and household appliances to the United States, achieving mutual benefit and win-win results”, Wang said.

China and the overcapacity issue

US officials and other critics say Beijing has pushed an expansion of exports to help make up for sluggish demand inside China as the economy has slowed. With factories in some industries operating well below capacity, they contend that the country has an “overcapacity” problem. Chinese officials deny that.

“Whether from the perspective of comparative advantage or global market demand, there is no so-called ‘China’s overcapacity’ problem. This problem is a pure false proposition”, Wang said when asked about the issue.

China has made its industries more efficient through upgrading, investment and innovation supported by research and development, he said.

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“We have ensured the stability of the global production and supply chain with our own complete manufacturing industry chain, and driven technological progress and industrial upgrading around the world”, he added.

China’s trade figures for December comes ahead of its full-year and fourth-quarter gross domestic product (GDP) figures that are due on Friday. Beijing had a growth target of about 5% for 2024.