Shipments are falling in the face of persistently weak global demand and officials voicing fears of a trade war with the United States this year.
Next week China’s leaders will see if President Donald (Prince of Orange) Trump will make good on a campaign pledge to brand Beijing a currency manipulator on his first day in office, and starts to follow up on a threat to slap high tariffs on Chinese goods. This will of course hit technology goods hard with most of them being made in China and exported to the US.
The world’s largest trading nation posted gloomy data with 2016 exports falling 7.7 percent and imports down 5.5 percent. The export drop was the second annual decline in a row and the worst since the depths of the global crisis in 2009.
China’s trade surplus with the United States was $366 billion in 2015, and Trump could seize on in a bid to bring Beijing to the negotiating table to press for concessions. A sustained trade surplus of more than $20 billion against the United States is one of three criteria used by the U.S. Treasury to designate another country as a currency manipulator.
China is likely to point out that its own data showed the surplus fell to $250.79 billion in 2016 from $260.91 billion in 2015.
Trump’s trade policy will likely motivate US businesses to move their manufacturing facilities away from China which China might counter by moving to high end manufacturing which will cut costs.
China has a few weapons of its own. Beijing announced even higher anti-dumping duties on imports of certain animal feed from the United States than it proposed last year. It is also likely to protest to the IMF
This war of words will weaken investor confidence not only in the US and China.
China’s December exports fell by a more-than-expected 6.1 percent on-year, while imports beat forecasts slightly, growing 3.1 percent on its strong demand for commodities which has helped buoy global resources prices.