China's Trade Surplus With US Hits Record High as Export Growth Declines


US trade data with China makes it increasingly likely Trump will increase tariffs on China.

Bloomberg reports China Trade Outlook Darkens as Trump Threatens Total Tariffs.

>Trade data for August released Saturday echoed both the cause and effect of the standoff with the U.S. -- the surplus with the U.S. rose to a record, while overall export growth slowed. A lone bright spot may be faster-than-expected import growth, signaling that domestic demand in the world’s second-largest economy is holding up for now.

>“With further large-scale U.S. tariff measures imminent, Chinese exporters will be hit hard and China’s GDP growth rate in 2019 is likely to be dented,” said Rajiv Biswas, Asia Pacific chief economist at IHS Markit in Singapore. “If the U.S. keeps ramping up its tariff measures against China, the export sector will face a long, hard road ahead despite government measures to mitigate the impact.”

>Hours before Trump’s Friday threats, China announced measures to support some of the exporters targeted by the barrage of higher duties. The Ministry of Finance said it will raise export rebate rates for 397 goods, ranging from lubricants to children’s books, meaning that firms shipping such products abroad will pay less value-added tax. The new rates will be effective from Sept. 15, the ministry said in a statement on its website.

Misleading Chart

I added the arrows to the Bloomberg Chart.

The chart is misleading because it compares on one scale absolute increases, but year-over-year percentages increases on another.

At first glance it appears as if China exports are declining. Rather, only the growth in exports is declining. That said, the US is bearing much of the brunt of it.

Trump Eyes Another $267 Billion In Tariffs

On Friday, I commented Trump Eyes Another $267 Billion in Tariffs (And He's Foolish Enough to Do It).

That $267 billion is in addition $200 billion in tariffs not yet scheduled.

Will It Work?

The short answer is no even though China does not import $467 in goods from the US. But it can penalize some products heavily.

It can also reduce export VATs as noted above.

Finally, tariffs are not on a tax on US consumers, they also serve to strengthen the US dollar hurting the very exporters Trump seeks to help.

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Comments (11)
No. 1-7

Despite the tariffs the trade deficit grows. Looks like it is time for an all out ban of Chinese products.


Trump's tariffs cause the USD to strengthen making US exports less competitive and US imports less expensive. The result: a trade deficit that explodes every time Trump opens his big ignorant mouth. He is completely clueless.


This whole focus on "trade deficits" sure seems like counting angels on pinheads. At best.

"Trade deficits" seem to be some kind of measure based on geographic territory - countries, usually. Why?

There are whole industries for which the concept of a territorial "trade deficit" has no meaning. Electronics, cars, and telecommunications come to mind. Do you know of others? Each identifiable product in these industries is conceived, created, and built all over the world. And no one, not you, not me, not the globally distributed people who put together final parts lists, knows where the parts, themselves, come from. And companies that put these products together have huge incentives to report what they want to report so far as dollars-per-territory. As do the taxing entities of these territories.

So what is a "trade deficit"? And, how is it even possible that the entertaining statistics we see reflect a reality?


How much of this was Chinese rushing products into America to beat tariffs?


Buying a Chinese product is a second choice for me because of quality and environmental concerns. When I choose Chinese therefore it is because other products are not available at a price I can pay. Adding tariffs means I will just buy less. It is doubtful I will decide to buy more overpriced US product as a result. Probably just as well for me to make do with less but somebody somewhere will have less work as a result.


Interesting: "The [Chinese] Ministry of Finance said it will raise export rebate rates meaning that firms shipping such products abroad will pay less value-added tax."

Seems like the US tariffs will in effect be paid by the Chinese government -- and not by the US consumer. If US Congress-scum can be prevented from screwing things up, this would mean less US government borrowing. Sounds like a big win for the US population!

Of course, the Chinese government is going to have to paper over its lost tax revenue somehow -- not so good for the Chinese population.


Trump believes that tariffs will somehow bring back jobs. The truth is that most job losses have been due to automation and technological improvements over the last 200 years. In the same time period, millions of new jobs have been created, but these jobs require higher levels of skills and education. The problem today is that the remaining unemployed in the US do not have the skills needed to fill all the jobs that currently sit empty. If Trump wants to employ these people, he needs to give them the skills they need for todays world. Tariffs will not help them at all. In fact tariffs are just another tax that will make consumers and businesses pay more for everything. Tariffs are a self-inflicted wound. Only a moron like Trump would keep pursuing such a stupid policy that hurts his own country far more than it helps.