Dive Brief:
- China exported $42.7 billion worth of goods to the U.S. in October, a 13.3% year-over-year increase, according to multiple news reports based on Chinese customs data.
- Analysts largely believe the uptick in exports is a result of American businesses rushing to bring in goods before the tariff rate on $200 billion worth of imports from China increases in January.
- Chinese exports to the U.S. also grew in September at a rate of 13% year over year.
Dive Insight:
U.S. import volumes began soaring this summer, and data continue to show no signs of a slowdown in trade flows from China to the U.S.
"Front-loading export activities should continue in November and December," Iris Pang, economist with ING, wrote in an analysis. "Export growth data will continue to be stronger than in previous holiday seasons."
Ben Hackett of the Hackett Associates made a similar prediction in August, expecting tariffs to ultimately lead to falling import levels in the U.S. but not until 2019.
American companies bringing in goods from China, whether finished products or components are faced with a number of decisions regarding sourcing. They can attempt to shift their supply chains and sourcing destinations to other countries, although that's often difficult to do and may increase labor costs.
As another option, businesses can continue to import from China and pay the tariffs but attempt to stock up before duties rise to 25% in January, although that strategy cannot work long term.
This approach is also costly, resulting in companies paying $4.4 billion in tariffs in September — a 54% year over year increase. That figure is likely to be even higher for October, which was the first full month tariffs were in effect on $200 billion worth of Chinese imports.
The U.S. and Chinese presidents will meet at the end of this month, but it's unexpected to result in a decrease in tariffs.
"We're hoping the meeting doesn't damage the trade relationship even further, as Trump once said that if trade talks fail, he could raise tariffs on all Chinese imported goods," Pang wrote.
