Trade Turmoil: China's Export Slowdown Amid U.S. Tariff Tensions

China's export growth slowed markedly in May as U.S. tariffs took a heavy toll, leading to the lowest increase in three months and exacerbating factory-gate deflation. Despite a reduction in U.S. tariffs, China's exports to the U.S. plunged, highlighting ongoing trade tensions affecting global economic dynamics.

In May, China's export growth hit a three-month low as U.S. tariffs significantly impacted shipments, worsening factory-gate deflation to its most severe in two years. This placed immense pressure on China's economy, both domestically and globally, as trade ties between the U.S. and China remained volatile.

Customs data revealed a dramatic 34.5% drop in China's U.S. exports year-on-year in May, the sharpest decline since February 2020. Despite earlier tariff reductions, this was a significant slowdown from April's 8.1% growth, with total exports falling short of expectations. Meanwhile, Chinese imports also saw a steeper decline, prompting Beijing to introduce monetary stimulus measures, yet markets reacted with limited response.

The ongoing trade tensions were underscored by decreasing imports from the U.S. and a sharp rise in rare earth exports, despite global supply chain disruptions. China's broader economic challenges were highlighted by sluggish domestic demand, weaker prices, and ongoing property market difficulties, as negotiations between both nations continued.

(With inputs from agencies.)