Chinese exports accelerated in May.

The New York Times notes China May Exports, Imports Beat Forecasts.

Bloomberg says the Global Trade Outlook Brightens. Really?

China’s overseas shipments accelerated in May from a year earlier, as global demand shows signs of picking up.

Exports rose 8.7 percent in May in dollar terms, the customs administration said Thursday. Imports increased 14.8 percent, leaving a trade surplus of $40.81 billion dollars. In yuan terms, exports rose 15.5 percent and imports surged 22.1 percent, bringing the trade balance to 281.6 billion yuan.

A brighter international outlook may provide support to the world’s largest trading nation, with the World Trade Organization saying it expects trade to “expand moderately” in the second quarter. Still, after a robust start to the year, the domestic economy is displaying some signs of weakening momentum. The official factory gauge held up in May, but a private gauge signaled contraction for the first time in 11 months.

China and the U.S. announced a deal in May to promote Chinese access for U.S. natural gas, financial services and beef as an “early harvest” of a 100-day review of the bilateral trade relationship that’s due to wrap up in July. China also vowed it will import $2 trillion from neighbors participating in its Belt and Road Initiative in the coming five years.

Robust Start to 2017?

Is Bloomberg in Bizarro World or an alternate universe somewhere?

Belt and Road Initiative

Wikipedia describes the Belt and Road Initiative.

The Silk Road Economic Belt and the 21st-century Maritime Silk Road, also known as the Belt and Road Initiative (B&R) and The Belt and Road (B&R), is a development strategy proposed by Chinese President Xi Jinping that focuses on connectivity and cooperation between Eurasian countries, primarily the People’s Republic of China, the land-based “Silk Road Economic Belt” (SREB) and the oceangoing “Maritime Silk Road” (MSR). The strategy underlines China’s push to take a larger role in global affairs, and the desire to coordinate manufacturing capacity with other countries in areas such as steel manufacturing.

China Exports and Imports in 2015

The above graphic from MIT.EDU, white arrows added by me.

China Surplusses 2016

  1. Hong Kong: US$275.3 billion
  2. United States: $253.1 billion
  3. Netherlands: $48 billion
  4. India: $47.2 billion
  5. United Kingdom: $37.6 billion
  6. Vietnam: $24.4 billion
  7. Mexico: $22.2 billion
  8. United Arab Emirates: $20.5 billion
  9. Singapore: $19.9 billion
  10. Pakistan: $15.6 billion

The above from Worlds Top Exports.

US Trade Deficit Widens

Before anyone gets too excited about improving global trade, I remind them of my June 2, article Trade Deficit Widens: Cascade of Bad News Accelerates, Trump Will Howl.

Trade in Goods and Services

Trade in Goods and Services Moving Average

US Trade Deficit by Country

Click on image for enhanced view.

Trade Deficit Exports Imports Percent of Total
Total 243,905 498,608 742,513 100
Eurozone 37,829 70,207 108,036 15.51
Germany 20,054 17,131 37,185 8.22
Canada 8,501 89,673 98,174 3.49
Mexico 23,037 77,566 100,603 9.45
China 106,481 39,335 145,816 43.66
Japan 22,596 22,005 44,601 9.26
Canada, Mexico, China, Japan, Germany 180,669 245,710 426,379 74.07
Canada, Mexico, China, Japan, Eurozone 198,444 298,786 497,230 81.36

Canada vs China

  • Exports to Canada: 89,673
  • Imports from Canada: 98,174
  • Canada Sum: 187,847
  • Exports to China: 39,335
  • Imports from China: 145,816
  • China Sum: 185,151

On a bilateral basis, Canada is the US’s largest trading partner.

Trade Deficit Breakdowns

  • China alone accounts for 43.66% of the deficit.
  • China, Mexico, Japan, and Germany account for 70.59% of the deficit.
  • China and the Eurozone account for 59.17% of the deficit.
  • China, Mexico, Japan, and the Eurozone account for 76.65% of the deficit.
  • Canada, the US’s largest trading partner, accounts for only 3.49% of the deficit.

This is what has Trump upset. But he is barking up the wrong tree when he blames NAFTA.

For discussion, please see Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?

The US trade data is for April. The links at the top are for May.

Proper Conclusion

On a relative basis, U.S. demand for foreign products is strong and foreign demand for U.S. products is not.

One month does not a trend make, even if one believes the May numbers from China.

Mike “Mish” Shedlock