China’s exports to the United States fell by 34.5% in May compared to the same month last year, the largest decline since February 2020.

Imports from the US decreased over 18%, causing China’s trade surplus with the US to drop 41.55% to US$18 billion.

Overall, China’s exports grew by 4.8% in May, missing the expected 5%, while imports dropped 3.4%, largely due to weak domestic demand.

Despite the drop in US trade, exports to Southeast Asia rose nearly 15%, with shipments to the EU and Africa increasing by 12% and over 33%, respectively.

China’s total trade surplus for May increased 25% year-on-year to US$103.2 billion.

Trade tensions remain high, with US tariffs on Chinese goods lowered from 145% to 51.1%, and China’s tariffs on US imports at 32.6%.

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🔗 Source: CNBC

🧠 Food for thought

1️⃣ Historical trade patterns showing resilience through redirection

China’s dramatic export pivot away from the U.S. to other markets reflects a historical pattern of trade adaptability that dates back centuries.

When the first American trading ship, the Empress of China, sailed to China in 1784, it established trade patterns that have repeatedly adjusted to geopolitical tensions over 240 years1.

Today’s 34.5% drop in U.S.-bound exports mirrors this adaptation, with China simultaneously increasing shipments to Southeast Asia by 15%, European Union by 12%, and Africa by 33%—effectively redirecting trade flows to maintain overall export growth2.

This pattern of trade redirection during periods of tension has become a defining feature of China’s economic strategy, allowing it to maintain resilience despite significant market disruptions.

The data demonstrates China’s ability to leverage its manufacturing base and diversify export destinations when faced with barriers in traditional markets, a strategy that has historical precedents in previous trade disputes.

2️⃣ Trade wars create lose-lose economic outcomes with predictable cost shifts

The sharp decline in U.S.-China trade represents a textbook case of how tariffs typically harm both economies while redistributing costs in predictable ways.

Studies of the 2018-2019 trade war showed U.S. tariffs led to approximately 25% reductions in imports from China, matching the current 34.5% drop, while diverting trade to countries like Taiwan and Mexico3.

When faced with tariffs, businesses don’t simply absorb the costs—90% of economic experts surveyed agreed that U.S. households ultimately bear most of the burden through higher consumer prices4.

The current $18 billion trade surplus with America (down 41.55% year-on-year) reflects how trade barriers reduce total economic activity while failing to eliminate trade imbalances entirely.

Historical analysis of tariff impacts consistently shows they function primarily as a tax on domestic consumers rather than a penalty on foreign producers, creating economic drag on both sides of the dispute.

3️⃣ Europe’s deepening Chinese trade ties signal a divergent Western approach

While U.S.-China trade plummets, Europe’s increasing economic engagement with China represents a significant divergence in Western trade strategies.

The European Union has increased its trade dependency on China even as the U.S. has reduced its reliance by 8.4 percentage points since 2017, creating different economic incentives across Western economies5.

This divergence is evident in the current trade data, with Chinese exports to EU countries rising 12% even as U.S.-bound exports collapsed by 34.5%, reflecting fundamentally different approaches to economic relations with China.

European firms face fewer regulatory pressures to diversify supply chains compared to their American counterparts, allowing them to maintain and even deepen Chinese business ties despite geopolitical tensions5.

China’s merchandise trade surplus with the EU rose significantly in 2022, demonstrating how Europe has effectively absorbed some of the export capacity no longer directed toward American markets6.

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