China Posts First Trade Deficit Since February 2017 As Exports Tumble, But Not Because Of Trade War

Overnight, China surprised the market with its first trade deficit in more than a year amid escalating trade frictions with the United States, however there may be less than meets the eye here, at least for now.

China's state customs announced that in March export growth unexpectedly dropped -2.7% Y/Y, far below the consensus estimate of an increase of 11.8%. 

Looking at the details, for exports to major destinations, exports growth dropped broadly. Specifically, for major DMs, exports to EU, US and Japan decelerated -7.0% yoy, -5.6% yoy and -3.7% yoy, respectively. For major EMs, exports to ASEAN grew by 1.4% yoy from a strong increase of 36.2% yoy in February.

At the same time, import growth rebounded 14.4% Y/Y, more in line with expectations of a 12.0% rebound, although in Yuan terms imports rose a slower-than-expected 5.9%, missing expectations for 7.5%.

For commodity imports, growth went down both in volume and value terms broadly. Specifically, in volume terms, iron ore imports contracted 10.2% yoy, vs. +0.9% yoy in February; crude oil imports grew 0.6% yoy, vs. +1.5% yoy in February; steel products imports decreased by 5.1% yoy, vs. -5.8% yoy in February. In value terms, iron ore imports continued to contract by -19.3% yoy, vs. -5.4% yoy in February; crude oil imports grew 19.1% yoy, vs. +26.4% yoy in February; steel products imports increased by 11.3% yoy, vs. +11.5% yoy in February.

Of note, the country imported 5.66 million tons soybeans in March, down 11 per cent yoy and a 18% plunge compared to last month, while crude oil imports increased over 7% month-on-month in March to 39.17 million tons, equivalent to 9.22 million barrels per day, which is the second highest on record only after the 9.57 million barrels per day set in January this year.

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