Chinese exporters get a taste of the misery to come

An unexpected contraction in China's exports during August is the clearest signal yet that the worst of the trade war damage is still to come.

Shipments of Chinese goods are expected to weaken further as the US implements new tariffs and as global demand remains soft. Compounding the pain is an expectation that the front-loading of orders — buying toys now, for example, to avoid the imposition of levies in December — will only exacerbate the downturn when that effect wears off.

The warning signs are evident. Exports during August decreased 1% in dollar terms from a year earlier, while imports declined 5.6%, leaving a trade surplus of $34.8bn. Economists had forecast that exports would grow 2.2%, while imports would shrink by 6.4%. Shipments to the US fell 16% from a year earlier.

Bloomberg Economics’ Chang Shu described the data as a "taste of what's to come."

It's possible that another dose of government-encouraged borrowing and spending will at least support the imports side of China's trade ledger, but it’s hard to escape the sense that the slowdown has a way to go yet.

"We're looking more like we're heading towards the bear-case scenario," where 6% growth in China this year slows to 5.4% next year under a 25% US tariff on all Chinese imports, said Eva Yi, senior economist at CICC. "More and more people are seeing this trade tension become a longer-term overhang rather than a short-term shock."

All this plays into US President Donald Trump's hand for the time being. As China's economy hits headwinds, America’' keeps adding jobs at a solid, albeit weaker, pace. "Both the strength and breadth of hiring suggest that economic conditions are weakening in the second half,  but not to the point of rising recession risk" for the US, according to Carl Riccadonna and Yelena Shulyatyeva of Bloomberg Economics.

ZAR/USD
17.58
(-0.95)
ZAR/GBP
22.94
(-0.19)
ZAR/EUR
20.72
(-0.12)
ZAR/AUD
12.60
(-0.01)
ZAR/JPY
0.17
(-0.59)
Gold
2032.73
(-1.75)
Silver
27.97
(-5.99)
Platinum
958.00
(-4.00)
Brent Crude
45.10
(-0.18)
Palladium
2133.50
(-4.17)
All Share
56757.73
(-1.56)
Top 40
52435.65
(-1.72)
Financial 15
9897.96
(+0.10)
Industrial 25
74671.49
(-1.98)
Resource 10
58948.78
(-1.89)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 925 votes
It depends on how the funds are used.
74% - 6209 votes
No. We should have gotten the loan elsewhere.
15% - 1276 votes
Vote