China’s exports to the U.S. dropped sharply by 33% in August, while overall export growth slowed to its weakest pace in six months. The decline reflects the fading effects of frontloaded exports and U.S. measures targeting transshipments, according to customs data. Imports from the U.S. also fell 16% year-on-year.
In U.S. dollar terms, China’s total exports rose 4.4% in August compared to a year earlier, missing economists’ expectations for a 5% increase and marking the lowest growth since February. Analysts noted that the slowdown partly reflects a high base from last year, when exports surged at nearly the fastest pace in 18 months.
“With the temporary boost from the U.S.-China trade truce fading and tariffs on rerouted shipments rising, Chinese exports are likely to face near-term pressure,” said Zichun Huang, China economist at Capital Economics.
Alternative markets and diversification
Facing challenges in the U.S., Chinese exporters are increasingly targeting alternative markets. Shipments to the European Union, ASEAN nations, and Africa grew 10.4%, 22.5%, and nearly 26% in August, respectively. From January through August, exports to the U.S. fell 15.5% while shipments to EU, ASEAN, Africa, and Latin America surged 7.7%, 14.6%, 24.6%, and nearly 6%, respectively.
“Chinese exporters are pushing for higher market share abroad due to weak domestic demand, helping to sustain overall export performance,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.
Trade tensions and rare-earth exports
Despite diversification, the U.S. remains China’s largest single-country trading partner, absorbing $283 billion of Chinese goods year-to-date through August. Bilateral trade tensions persist, with Washington threatening a 200% tariff on Chinese goods if Beijing fails to meet rare-earth export commitments. China’s rare-earth shipments jumped 22.6% in August to 5,791.8 metric tons.
Chinese exporters have increasingly relied on routing goods through third countries to bypass U.S. tariffs—a strategy now facing tighter scrutiny following July’s announcement of a 40% tariff on suspected transshipments.
Domestic demand and monetary policy
Weak domestic demand is another headwind. Local “cash-for-clunker” programs supporting vehicle, appliance, and smartphone sales have slowed as allocated funds were quickly exhausted. Deflationary pressures remain, with Goldman Sachs forecasting a 2.9% year-on-year decline in the producer price index for August and a 0.2% drop in headline CPI.
Economists expect Beijing may respond with monetary easing. Neo Wang, lead China strategist at Evercore ISI, anticipates a 10–20 basis point cut by the People’s Bank of China, with key economic data on retail sales, industrial output, investment, housing, and unemployment scheduled for release next Monday.
“With subdued growth expected in upcoming data, a rate cut could help counter pessimism and provide support to both markets and domestic demand,” Wang said.
