China posted a record trade surplus of $99 billion last month, the highest in more than two decades, as it continued to drive export growth despite looming tariff threats from President Donald Trump.
Official trade data for June showed an 8.6% increase in export volumes, beating economists’ expectations of 8% and marking the fastest growth in 15 months. The strong performance outpaced a 7.6% rise in export volumes in May.
China’s trade surplus – the difference between the value of its imports and exports – has reached its highest level since records began in 1992.
This spectacular growth in exports, now focused on high-value advanced technologies such as electric vehicles and computer chips, is likely to alarm Western policymakers, who have raised concerns about Chinese “overcapacity” in vital sectors such as semiconductors and clean energy.
In response, the United States and the European Union have imposed tariffs on electric vehicles to protect domestic automakers from an influx of cheap, state-subsidized Chinese products such as those made by BYD. The new Labour government in the United Kingdom has not made clear its position on adopting similar tariffs in strategic industries.
China’s rapid economic rise over the past 30 years has been driven by its dominance of global export markets, with its industries now moving from low-cost, disposable goods to high-value products.
Despite rising trade protectionism in the United States, June trade figures show that total Chinese exports to the United States rose 6.6% over the year. Exports to Germany and the United Kingdom also grew by more than 8%, and to the European Union as a whole by 4.1%.
“The US alone contributed 1 percentage point to overall export growth, the largest single-country impact in June,” noted Kevin Lam, senior China economist at Pantheon Macroeconomics. “China’s export strengths lie in mechanical and electrical products, which account for nearly 60 percent of total exports, growing 7.5 percent and contributing 4.4 percentage points to the trade surplus.”
China has also boosted exports to Latin America, Taiwan, Vietnam and Southeast Asia. A weak exchange rate and lower domestic manufacturing costs have boosted its global competitiveness.
Goldman Sachs economist Shen Chuan Chen suggested that Chinese authorities may be “front-loading” some exports to preempt future tariffs on high-value technologies, although quantifying that impact is difficult.
The record trade surplus in June was boosted by a 2.3% drop in imports, reflecting continued weakness in China’s consumption. Western economists have urged the Communist Party in Beijing to rebalance the economy by stimulating domestic consumption to support faltering growth.
Trump has pledged to impose 60% tariffs on all Chinese imports and a global 10% tariff on all trade with the United States, including the United Kingdom and the European Union, if he is re-elected in November. According to the Peterson Institute and Goldman Sachs, these tariffs would cost the average American household $1,700 and increase consumer price inflation by more than 1 percentage point.
China’s export performance remains resilient in the face of US and EU protectionism, which currently targets only a small portion of Chinese exports, noted Zhichun Huang of Capital Economics. “The impact of tariffs can be mitigated by trade reorientation and exchange rate adjustment. Overall, we expect exports to continue to be a driver of China’s economic growth in the near term,” he added.