Chinese exports tumble as trade war takes its toll

Chinese exports suffered their worst decline in three years in February as the trade war with the US took its toll, according to official data released on Friday.

Dollar-denominated exports in China tumbled 20.7% last month from a year ago, missing expectations for a 4.8% drop and compared to a 9.1% increase in January.

Dollar-denominated imports were down 5.2% from a year ago, versus expectations for a 1.4% decline and a 1.5% year-on-year fall in January.

Meanwhile, the trade balance narrowed to $4.12bn from $39.16bn in January, which was well below consensus expectations of $26.2bn, with the trade surplus with the US down to $14.72bn from $27.3bn in January.

Pantheon Macroeconomics said the data "will help the doves to justify further easing, with the PBOC likely to keep rates below their previously established corridor".

Michael Hewson, chief market analyst at CMC Markets, said it should be noted that the figures will have been "hugely skewed" by the Lunar New Year holiday last month, with most of the country closed for several days, which means the numbers must be looked at in that context.

Oxford Economics said it expects subdued global trade and the impact of US tariffs to continue to weigh on exports in the coming months, although the tariffs suspension by the US and China and increased likelihood of a more lasting agreement should help eventually.

"Underlying tensions on technology and China’s industrial policy are unlikely to subside any time soon and the survival of the agreement will remain dependent on political judgments in Washington DC. Nonetheless, an agreement and prolonged tariff suspension - and perhaps even a reduction in existing tariffs - should be a positive for China’s exports and the economy more generally."