China’s Record Trade Surplus With US Adds Fuel to Trade War Fire

September 9, 2018 Updated: September 9, 2018

BEIJING—China’s trade surplus with the United States widened to a record in August, even as the country’s export growth slowed slightly, an outcome that could push U.S. President Donald Trump to turn up the heat on Beijing in their trade dispute.

The politically sensitive surplus hit $31.05 billion in August, up from $28.09 billion in July, customs data revealed on Sept. 8, surpassing the previous record set in June.

Over the first eight months of the year, China’s surplus with its largest export market has risen nearly 15 percent, adding to tensions in the trade relationship between the world’s two largest economies.

China’s annual export growth in August moderated slightly to 9.8 percent, the data showed, the weakest rate since March.

The number missed analysts’ forecasts that shipments from the world’s largest exporter would rise 10.1 percent, slowing only slightly from 12.2 percent in July.

Even with U.S. tariffs targeting $50 billion of Chinese exports in effect for their first full month in August, China’s exports to the United States still accelerated, growing 13.2 percent from a year earlier from 11.2 percent in July.

“There is still an impact from front-loading of exports, but the main reason [for still-solid export growth] is strong growth in the U.S. economy,” said Zhang Yi, an economist at Zhonghai Shengrong Capital Management.

China’s imports from the United States grew only 2.7 percent in August, a slowdown from 11.1 percent in July.

But China’s economic outlook is being clouded by the rapidly escalating U.S. trade dispute and cooling domestic demand.

Trump upped the ante on Sept. 7, warning that he was ready to slap tariffs on nearly all Chinese imports to the United States. He threatened duties on another $267 billion of goods on top of $200 billion in imports primed for levies in coming days.

Washington has long criticized China’s huge trade surplus with the United States and has demanded Beijing reduce it. But disagreements between the two major economic powers run deeper than just the trade balance and tensions remain over limits on U.S. firms’ access to Chinese markets, intellectual property protection, technology transfers, and investment.

The surplus with the United States was larger than China’s net surplus for the month, indicating that China would be running a deficit if trade with the world’s largest economy was excluded.

Official and private manufacturing surveys for China show global demand for Chinese goods is clearly on the wane, with export orders shrinking for months in a row.

“Risks have increased due to the negative impacts of China–U.S. trade friction. The impact on exports may gradually start to show up, with future export growth possibly declining,” said Liu Xuezhi, an analyst with Bank of Communications.

By Elias Glenn, Lusha Zhang, & Xu Jing