U.S. Trade War Dwindles China’s Exports
*Shipments plunge 35% in May despite truce
* Beijing turns to ASEAN, EU
China’s exports to the United States fell by a staggering 35 percent in May, the steepest drop since early 2020, as tensions between the two economic giants continue to weigh heavily on trade flows despite a temporary diplomatic truce.
The collapse in U.S.-bound shipments dragged down overall export momentum, with total exports growing just 4.8 percent year-on-year in May, a sharp slowdown from 8.1 percent in April. Imports declined 3.4 percent in the same period, reflecting sluggish domestic demand and renewed concerns about deflation.
The latest figures point to deepening pressure on China’s industrial sector, where weak external demand is combining with falling prices to squeeze manufacturers.
China’s Producer Price Index (PPI), which tracks changes in factory gate prices, fell 3.3 percent in May its fastest decline in nearly two years.
Retail sales and automobile purchases have also softened, reinforcing worries that consumer confidence remains fragile.
In response, the People’s Bank of China has introduced a new round of interest rate cuts in an effort to stimulate consumption and stabilize growth.
However, analysts warn that monetary easing alone may not be sufficient to counteract the drag from geopolitical and structural headwinds.
Amid declining U.S. demand and tariff pressures, Beijing is intensifying efforts to diversify export markets.
Trade volumes to the European Union and Southeast Asia including Vietnam, Indonesia, and Thailand have seen modest growth, aligning with China’s long-term push to reduce reliance on Western markets and move up the global value chain.
Meanwhile, trade talks are set to resume this week in London. Chinese officials are reportedly considering export restrictions on rare earth elements critical inputs for electric vehicles, semiconductors, and defense systems.
The proposal has sparked warnings from the United States and the European Union, who say any such move could further escalate tensions and prompt retaliatory measures.
As a result of the deteriorating trade landscape, major banks including UBS have revised China’s 2025 GDP growth projections downward. UBS now forecasts 4.5 percent growth, citing weaker export performance, persistent deflationary pressure, and geopolitical uncertainty.
“The current export data is more than a monthly blip it reflects a recalibration of global trade flows. Whether China adapts or stagnates will depend on how swiftly it restructures its economic priorities,” said Lin Meiyu, a senior economist at the China Global Trade Institute.
The 35 percent plunge in U.S.-bound exports underscores the lasting impact of the trade war and signals that a new phase of global economic realignment is already underway.
