“Is China’s economy slumping? Is the trade war dousing Chinese business activity? Not according to the October trade data. China’s exports climbed 15.6% in October, versus the same month a year ago, in US dollar terms—way higher than what analysts expected. The real surprise, though, was the eye-popping 21.4% year-over-year leap in Chinese imports. That’s odd given that China’s economy is slowing abruptly again, which should translate to sluggish demand for goods from consumers and businesses.” (Gwynn Guilford, Despite US tariffs, China’s trade soared in October. It may not last, November 9, 2018)

The US is traditionally a large purchaser of China’s exported products.

Indeed, the US typically accounts for about 20% of China’s exports. In late September, the US imposed another 10% tariffs on some $200 billion worth of Chinese goods. One would have expected this to dampen China’s exports to the US. Instead, China’s exports to the US increased 13% in October. The tariff hikes which were originally scheduled to jump from 10% to 25% in January, were recently postponed.

US importers were stocking up on products from China before the new year when they thought the 25% tariffs would be imposed. In other words, front loading in advance of tariffs explains much of China’s recent export surge.

On the other hand, China’s imports from the US in October were 2% lower than a year earlier, while China’s exports surged. China has clearly started to divert its imports away from the US.

China’s trade has also been affected by currency moves. The yuan has declined about 10% against the USD since the tariff wars began, but the yuan has also weakened against other currencies. The 10% decline in China’s currency has clearly offset some of the impact of higher tariffs.