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China Exports: Trump Tariffs, Booming Growth, Or Tainted Trade?

Jeffrey Snider profile picture
Jeffrey Snider

China's General Administration of Customs reported that Chinese exports to all other countries were in February 2018 an incredible 44.5% more than they were in February 2017. Such a massive growth rate coming now has served to intensify the economic boom narrative.

A strengthening U.S. recovery is helping underpin China's outlook as Asia's biggest economy seeks to cut excess capacity and transition to reliance on domestic consumption rather than debt-fueled infrastructure spending.

The article quoted here, however, was referring instead to the 48.3% gain in exports China Customs recorded for February 2015. That clearly out of whack increase, like this latest one, was a pure outlier. It wasn't treated that way, of course. Depending upon it for interpreting the direction of the Chinese and global economy was a mistake; the US headed further into a downturn that China hasn't yet recovered from.

What happened in February 2018?

At this point, it's impossible to determine. The easy answer would be to attribute it to President Trump's trade and tariff threats. The administration has been talking about them seriously since the end of last year. It would be naïve to assume Chinese exporters haven't been in a rush to push product overseas to get ahead of any possible interference.

The Custom's data, however, show a pretty broad spread over the various major export destinations for Chinese goods. Exports to just the United States did spike by 46% and therefore do suggest this is a valid if perhaps partial explanation. We might expect exports to jump if at lesser rates to other locations for the same reason. It is still possible that Chinese firms are calculating for European and other countermoves against not just US tariffs, concerns about protectionism in general as trade becomes a global target this year for the first time.

This article was written by

Jeffrey Snider profile picture
As Head of Global Investment Research for Alhambra Investment Partners, Jeff spearheads the investment research efforts while providing close contact to Alhambra’s client base. Jeff joined Atlantic Capital Management, Inc., in Buffalo, NY, as an intern while completing studies at Canisius College. After graduating in 1996 with a Bachelor’s degree in Finance, Jeff took over the operations of that firm while adding to the portfolio management and stock research process. In 2000, Jeff moved to West Palm Beach to join Tom Nolan with Atlantic Capital Management of Florida, Inc. During the early part of the 2000′s he began to develop the research capability that ACM is known for. As part of the portfolio management team, Jeff was an integral part in growing ACM and building the comprehensive research/management services, and then turning that investment research into outstanding investment performance. As part of that research effort, Jeff authored and published numerous in-depth investment reports that ran contrary to established opinion. In the nearly year and a half run-up to the panic in 2008, Jeff analyzed and reported on the deteriorating state of the economy and markets. In early 2009, while conventional wisdom focused on near-perpetual gloom, his next series of reports provided insight into the formative ending process of the economic contraction and a comprehensive review of factors that were leading to the market’s resurrection. In 2012, after the merger between ACM and Alhambra Investment Partners, Jeff came on board Alhambra as Head of Global Investment Research. Currently, Jeff is published nationally at RealClearMarkets, ZeroHedge, Minyanville and Yahoo!Finance. Jeff holds a FINRA Series 65 Investment Advisor License.

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Comments (7)

The Nattering Naybob profile picture
"But the dollar end of China trade also proposes the possibility of not just distortion but outright fraud. It had by later 2014 become an almost regular occurrence to where China would "export" fake goods into Hong Kong using fake invoices so as to import instead US rather than Hong Kong dollars."

Indeed your 2014 speculations were spot on. And with the wave of a customs agents wand, a 40% spike on goods which will never see the sea, and wind up back in China. As we commented on March 4th in your chart of the week...

"If HK flows were outgoing this might normalize the HIBOR LIBOR spread. Somebody conducting carry trades might also be borrowing HKD to invest not just in USD assets, but also offshore RMB (CNY) assets. Sitting in an offshore warehouse with an overestimated declared value perhaps? Should the HKD top 7.85 on USD, that might trigger HK to sell USD and buy HKD. "

Ben Gee profile picture
As I said many times before, monthly data are not reliable. I like annual data ever more than quarterly data.
China want to sell before tariff come into effect.
China want to sell as much as possible tariffs or no tariffs, there have to be buyers. Maybe buyers want to buy all they can before tariffs come into play.
Aricool profile picture
Ben, what is your evidence that this is the cause of the spike? Very hard to believe given such a small % of China steel/Al exports go into the US at all. so, w/o solid evidence, your assertion would seem untrue.
Ben Gee profile picture
China may sell very little raw steel to the US, China sell many, many products made of steel to the US. China also sell steel to many countries that make steel products that sell to the US.
Everybody always want to sell, you can not sell when there are no buyers.
To blame the sellers for selling is folly, it is the buyers that do not have any self control.
Over capacity of the seller leads to dumping. I don't blame buyers for picking up inventory at extra low prices.
China mfg. PMI in a trading range since 2009.
From 2012 the TR is focused, more settled. Recently both New Orders and
New Export Orders have moved in direction of the resistance line, but failed to reach & breach it, - then moved back to the center.
TR never last forever. Perhaps there will be no next time.
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