China’s imports unexpectedly fell 8.4% year-on-year in January-February, while exports lost momentum, as the US-China trade war escalates. The slump in imports signals Beijing may be scaling back purchases of key commodities to prepare for four more years of grueling trade tensions.
The US imposed an extra 10% levy on Chinese goods, arguing Beijing had not done enough to stem the flow of deadly opioid fentanyl. This move led to a slowdown in export front-loading shipments ahead of curbs and production slowed due to the Lunar New Year festival.
Analysts say the drop in imports is related to China’s consideration of building strategic reserves. “China may have imported too many of them in 2024, and needs to scale back the purchase volume,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
Export momentum had been a bright spot for an economy struggling with weak household and business confidence caused by a prolonged property market debt crisis. However, exports from China rose just 2.3% over the same period, missing expectations for a 5% increase.
China’s trade surplus stood at $170.52 billion. The country’s crude oil imports fell 5% in the first two months of the year, while rare earths imports plunged 24.1%. Iron ore imports also fell 8.4%, curbed by weather-related disruptions in major producer Australia.
Chinese policymakers have vowed to prioritize boosting consumption and domestic demand over 2025, with an economic growth target of “around 5%”. However, the external environment is expected to be less supportive this year, putting pressure on policymakers to improve domestic demand.
With sluggish household demand and property sector woes weighing on growth, Chinese officials must find alternative export markets for its sprawling industrial sector. The country’s implied GDP deflator is expected to be negative for a third year in a row, the longest deflationary streak since Mao Zedong’s Great Leap Forward in the early 1960s.
Source: https://www.reuters.com/markets/asia/chinas-imports-tumble-demand-skids-trade-war-heats-up-2025-03-07