BEIJING (Reuters) – China’s exports probably fell for a second successive month while imports likely contracted more sharply in July, a Reuters poll showed, hurt by tit-for-tat tariffs in a rapidly escalating trade war between the world’s two biggest economies.
U.S. President Donald Trump has threatened to slap tariffs on more Chinese goods on top of duties already imposed, and Beijing has responded by halting the purchase of U.S. agricultural products.
If trade data due on Thursday are in line with economists’ downbeat forecasts or worse, it could increase the risks of a global recession and heighten concerns about a sharper-than-expected slowdown in China.
The country’s July exports are expected to have declined 2 percent from a year earlier, according to the median estimate of 29 economists in the poll, compared with a 1.3% decline in June.
Imports are likely to post a steeper decline in July, pointing to softer domestic demand, as Beijing’s stimulus measures have failed to put a floor under sliding economic growth.
Trump stunned financial markets last week by vowing to impose 10% tariffs on the remaining $300 billion of Chinese imports from Sept. 1, abruptly breaking a brief ceasefire in a bruising trade war that has disrupted global supply chains and slowed growth.
“If tariffs escalate another step further, to 25% on $300 billion, and remain on for 4-6 months, our economists would expect a recession within three quarters,” said Morgan Stanley (NYSE:) analysts in a research note last week.
On Monday, the Chinese currency breached the key 7-per-dollar level for the first time in more than a decade, in a sign Beijing might be willing to tolerate more yuan weakness, which could offset some impact from the higher U.S. tariffs.
After the yuan’s stumble, the U.S. Treasury Department ratcheted up tensions by determining for the first time since 1994 that China was manipulating its currency.
Some analysts say the scheduled new tariffs may again push Chinese exporters to front-load some of their U.S.-bound exports into August from September, which could provide some support to China’s export growth in August.
“We believe such a boost will be quite limited, given the relatively short time frame, and is likely followed by some payback effects in and after September,” said analysts at Nomura in a note on Friday.
July imports were forecast to have contracted 8.3% from a year earlier, worsening from a 7.3% decline in the previous month, the poll showed.
China’s economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of mounting U.S. trade pressure.
Beijing will step up efforts to boost demand and support the economy, but will not use the property market as a form of short-term stimulus, a top decision-making body of the ruling Communist Party said in July.
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