China’s export growth slowed to a three-month low in May as heavy U.S. tariffs triggered a sharp decline in shipments to the United States, while deepening deflation added further pressure to the world’s second-largest economy.
Customs data showed that exports rose 4.8% year-on-year in May, missing forecasts and down from April’s 8.1% increase. The main drag came from the United States, where exports plunged 34.5%—the steepest drop since February 2020, when the COVID-19 pandemic first disrupted trade. Imports also slumped 3.4% year-on-year, reflecting weak domestic demand.
China’s trade surplus with the U.S. shrank 41.6% to $18 billion, though the overall trade surplus widened to $103.2 billion, buoyed by strong exports to Southeast Asia, the EU, and Africa.
The export slump came despite a partial easing of tariffs in mid-May, following a temporary truce between Washington and Beijing. Analysts say the damage had already been done by then, as U.S. importers had reduced orders months in advance. Exports of rare earths, smartphones, and home appliances fell, while shipments of cars and ships increased.
China’s producer price index fell 3.3% in May, marking the sharpest drop in nearly two years. Consumer inflation remained weak, with core inflation rising just 0.6%. Economists warn that deflationary pressures are likely to persist due to industrial overcapacity and sluggish consumption.
Trade tensions remain high despite recent talks. U.S. President Donald Trump’s sweeping 145% tariffs on Chinese goods were only partly rolled back under the Geneva agreement, with current average duties still at 51.1% for Chinese exports and 32.6% for American goods.
Chinese and U.S. trade officials are meeting again in London to iron out remaining disputes, including controls on critical mineral exports and new U.S. restrictions on Chinese students and tech exports. Beijing insists it will continue to review applications to export rare earths, citing rising demand from green energy and robotics sectors.
Analysts expect some export recovery in June as exporters benefit from the reduced tariffs. However, the outlook remains uncertain, with trade friction, domestic deflation, and weak consumer confidence clouding China’s economic recovery.