Rocky Waters
It’s a perilous time for the global trading system. President Trump has imposed an across-the-board tariff of 20%, in two tranches of 10%, on U.S. imports of Chinese goods. There are threats of more action, on microchips, drugs, and automobiles. Lesser degrees of protectionism in Europe, Canada and elsewhere are also denting confidence in trade. In China, internal consumer demand has been tepid for some time. Officials from both countries are ratcheting up rhetoric. “China’s determination to safeguard its own interests is unwavering,” said Wang Wentao, China’s commerce minister, this week. “The two sides can meet at the appropriate time and can also communicate as soon as possible.”
China’s trade results in the first two months of 2025 offer little comfort overall. Exports rose only 2.3% to $539.9 billion, and imports fell 8.4% to $369.4 billion, as China’s considerable trade surplus widened. China always reports trade data from the first two months of the year combined in order to blunt the volatility created by the Chinese New Year. In this case, it couldn’t deflect the news. Analysts had expected better.
Silver Lining: Tech
There was, however, a silver lining in the tech sector. An artificial intelligence revolution is goosing investment and launching new supply chains. It’s an exciting time in many ways. There may be protectionism coming for high-tech, but for now, it’s boosting global trade. China’s shipment of high-tech goods bumped up 5.4% $131.9 billion. Exports of integrated circuits rose 11.9% to $25.1 billion. Imports of high-tech products increased 6.4% to $109.5 billion. Imports of many industrial commodities declined during the first two months of 2025. Imports of iron ore dropped 30% to $19 billon. Imports of coal are finally stagnating by quantity and declined 18.5% by value to $6.5 billion. However, purchases of copper, which is used for high-tech wiring, were the exception. They increased 5.6% to $11.4 billion.
The consolidation of the global economy into Asian, European and American poles continues. Exports to ASEAN countries increased 5.7% to $87.2 billion, while shipments to the European Union nudged up only 0.6% to $79 billion. Exports to the U.S. increased 2.3% to $75.6 billion. Sales to Singapore dropped 13.8% to $9.8 billion. Shipments to Russia, which had soared since Russia’s invasion of Ukraine in 2022, dropped 10.9% to $15 billion. Imports from the U.S. rose 2.7% to $26.5 billion. Shipments from the EU declined 5.6% to $36.9 billion. Even imports from ASEAN nations fell 1.3% to $56.6 billion. Imports from Russia declined 3.9% to $19.7 billon.
The Demand Dilemma
The Chinese export economy has been suffering from a variety of global trends. The Western appetite for low-cost consumer goods seems to be diminishing. Shipments of toys plummeted 11.1% to $5 billion. Exports of luggage sank 20.2% to $4.5 billion. Other sectors have been tepid. Exports of agricultural products, for example, rose only 3% to $15.2 billion. Shipments of automobiles, which had been booming, rose 2.5% to $16.1 billion. Prices appear to be falling. China shipped out 971,000 cars in January and February, a 16.8% rise by quantity. The rare earths market, which politicians, most lately in the U.S., love to talk about, is tiny. How tiny? Exports of rare earths decreased 0.4% to $82 million.
Consumer demand in China continues to challenge policymakers. Imports of automobiles fell 50.3% to $3 billion. Purchases of pharmaceuticals dropped 10.8% to $6.6 billion. “It’s likely that imports will remain soft this year unless we see a stronger than anticipated rebound of consumption and private investment this year,” according to Lynn Song, an economist at ING. The leadership in China has been focused on trying to improve economic growth. On Wednesday, Li Qiang, China’s premier, said that domestic demand was “weak”. For 2025, he announced an economic growth target of 5%.
John W. Miller