China experienced its first export decline in almost two years in October, due to a high base effect and a slowing of businesses’ front-loading momentum, as trade tensions between the U.S. and China increased before the two nations reached an agreement.
The value of outbound shipments fell 1.1 percent in U.S. dollar terms compared to a year ago, the first contraction since March 2024, when exports fell by an astonishing 7.5 percent.
The decrease in exports was surprising, as economists predicted 3 percent growth, according to a Reuters survey, and it was down from a six-month peak of 8.3 percent in September.
Imports increased by 1 percent in the previous month, contrary to the high 3.2 percent forecast, since the housing market slowdown and poor employment market situation still burdened consumer demand. Therefore, they had surged to 7.4 percent in September.
Chinese exporters and US consumers were relieved a week ago when U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, reached an agreement during the meeting in South Korea, which has defused a conflict that had escalated to a full-scale trade war between the two nations.
The two countries agreed to reverse various punitive practices, such as high tariffs, export controls for critical minerals, and advanced technology; therefore, Beijing agreed to purchase additional American soy and collaborate with Washington to intercept fentanyl flows.
Macquarie Group estimates that the actual U.S. tariff on Chinese exports was cut to 31 per cent after the trade truce.
The steep fall last month was partly as a result of a high base in October 2024, when exports increased at the quickest pace in more than two years.
China has accumulated a trade surplus exceeding $964.8 billion in the first 10 months of the year, 23 percent higher than the level of that period in 2024.
A report released on Thursday by Oxford Economics said it increased its Chinese export growth forecast to 3.5-5 percent annually in real terms as the Chinese government works to further industrialize its next five-year growth plan and the Chinese exporters diversify into regional and emerging markets.
The research company made better predictions regarding the real GDP growth by raising the company to 4.5 percent in 2026 and 4.4 percent in 2027.
Chief China economist of Macquarie Group, Weijun Larry Hu, who claims that Beijing will have to focus towards domestic demand as the main growth driver, stated that “As long as exports remain strong, policymakers don’t need to boost consumption; if exports were to plunge, they would have to turn to domestic consumption to achieve the annual GDP target, at some point between 2026 and 2030.”
Hu anticipates Beijing will pursue further growth of “around 5%” in 2026 and will calibrate stimulus to neither miss nor over-achieve that goal. However, the country is witnessing a decrease in manufacturing.
The declining prices and fierce price battles have forced Beijing to intensify efforts to restrain industrial excess capacity in recent months. In the first nine months, the profits of the large industrial companies increased by 3.2 percent.
Economic statistics in October indicated that the manufacturing activity had been declining in seven consecutive months in a row with trade clashes with Washington once again sparked.
