China Exports Post Seasonal Drop, Leaving Surprise Trade Deficit

China’s overseas shipments posted a decline on seasonal effects around the Chinese New Year holiday.

Exports fell 2.7 percent in March from a year earlier, after a revised 44.1 percent gain the previous month, the customs administration said Friday. Imports increased 14.4 percent, leaving a trade deficit of $4.98 billion, the first since February 2017. Economists in a Bloomberg survey had forecast a surplus of $27.5 billion.

Trade disputes have been escalating as President Donald Trump threatened tariffs on some $150 billion of imports from China, and Beijing announced potential retaliation, though those tensions haven’t been decisive for actual commerce yet. Data due Tuesday are projected to show that China’s expansion remained intact in the first quarter, with the economy forecast to slow this year.

China Exports Post Seasonal Drop, Leaving Surprise Trade Deficit

Economists said that the fall in exports was due to seasonal effects because the Lunar New Year holiday fell in mid-February this year, weighing on March exports, while the year-earlier comparison was elevated because the week-long break began in January the prior year.

What Our Economists Say:

The export drop reflects “seasonal effects and payback for February’s outsize growth, not the impact of simmering trade tensions,” Bloomberg economists Tom Orlik and Fielding Chen wrote in a note. “Looking at exports for the first quarter as a whole, the pace of increase remains remarkably robust, with strong global demand the main factor. Tweeted tariff threats are still some way from real-world policy impact.”

The trade surplus with the U.S. widened to $15.4 billion, the most in more than a year, according to Bloomberg calculations. China’s deficits with Taiwan, South Korea and Germany all widened.

“The trade deficit is only a temporary phenomenon, and not a new normal at all, as it was mainly driven by imports of energy products, which are volatile import items,” said Iris Pang, an economist at ING Groep NV in Hong Kong. “The drop in raw materials exports was due to late resumption of work at factories.”

Import volumes for soybeans increased just 0.2 percent in the first quarter, compared with a 20 percent rise a year earlier. China is the biggest buyer of American soybeans, picking up about one-third of the entire U.S. crop, which it uses largely to feed 400 million or so pigs.

“We hope both China and the U.S. can solve the disputes with wisdom and respect, in a constructive way,” Huang Songping, a spokesman for the customs administration, said Friday at a briefing in Beijing. “We hope trade relations can return to the track of healthy and stable development.”

First quarter data were affected by currency effects as well as the later holiday. The yuan increased 3.7 percent in the first three months for the biggest gain in a decade.

“What’s most important is demand conditions,” Grace Ng, a China economist at JPMorgan Chase & Co. in Hong Kong, said Friday in a Bloomberg Television interview. “What we’ve seen since the second half of last year from a global perspective is pretty strong demand generally on consumers and capex so that’s rather supportive for China’s exports.”

— With assistance by Xiaoqing Pi, Miao Han, Yinan Zhao, Ran Li, and Phoebe Sedgman

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