By Joe Cash
BEIJING (Reuters) -China’s imports unexpectedly shrank over the January-February period, while exports lost momentum, as escalating tariff pressures from the United States cast a shadow over the recovery in the world’s second-largest economy.
The first two months of the year saw the opening salvo of a renewed U.S.-China trade war, with U.S. President Donald Trump imposing an extra 10% levy on Chinese goods, arguing Beijing had not done enough to stem the flow of the deadly opioid fentanyl.
That called time on exporters’ efforts to front-load shipments ahead of the curbs while production also slowed as Chinese workers downed tools for the Lunar New Year festival.
Analysts say the slump in imports signals Beijing has begun scaling back purchases of key commodities, as it prepares for four more years of gruelling trade tensions with the second Trump administration.
“The drop in imports is seen across grains, iron ore and crude oil, and could be related to China’s own consideration of building strategic reserves,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
“China may have imported too many of them in 2024, and needs to scale back the purchase volume,” he added. “This is certainly true for iron ore, as steel production clearly exceeds what is needed by the economy.”
Export momentum had up until now been a bright spot for an economy otherwise struggling with weak household and business confidence caused by a prolonged property market debt crisis.
Imports fell 8.4% year-on-year, customs data showed on Friday, missing the 1% growth forecast in a Reuters poll of economists and a 1% uptick in December.
Exports from the largest manufacturing nation rose just 2.3% over the same period, missing expectations for a 5% increase and slowing from December’s 10.7% gain.
China’s customs agency publishes combined January and February trade data to smooth out distortions caused by the shifting timing of the Lunar New Year, which fell between January 28 and February 4 this year.
“(Slowing exports) may be partly due to the slowdown of export front loading, which was strong late last year to avoid the trade war,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.
“The sharp decline of imports may reflect both weak domestic demand as well as a decline in imports for processing trade,” he added.
“The damage of higher U.S. tariffs on China’s goods will likely show up next month.”
Imports by state-owned enterprises shrank 20.6% compared with a 2.7% rise among private firms, the customs data showed, suggesting the world’s largest commodities importer is relying more on stockpiles, given the dominant role of state-backed buyers.
