China Economic Review

US trade deficit with China reaches new record high

China’s trade data for August dealt a potential blow to negotiations between Beijing and Washington to avoid a trade war, as the United States’ monthly bilateral trade deficit reached the highest level on record.

Data from China’s General Administration of Customs released Saturday showed that $31 billion more goods and services flowed from China to the US last month than in the opposite direction. The gap widened from the $28 billion surplus posted in July.

Exports to the US were up 13.2% year-on-year, compared to 11.2% year-on-year in July. China’s imports from the US, meanwhile, grew only 2.3% y/y, down from 11.1% in July.

Despite the increase in its bilateral surplus with the US, China’s overall trade surplus shrank in August, with total imports up 20% y/y.

Analysts have pointed to a sliding yuan, front-loading from suppliers ahead of further tariffs and a lack of alternative suppliers for the US as potential reasons for August’s figures.

“In our view, China’s trade growth is likely to hold up in general this year,” wrote Serena Zhou, an analyst at Mizuho Securities. “Apart from the help from some possible front-loaded shipments, we believe the negative impact would only become more visible after the new tariffs become effective later this year.”