ASEAN becomes China’s No.2 trading partner

Beijing — The U.S. is losing importance as a trading partner of China as their tariff war drags on, dropping a notch to third place in the first half of 2019 to trail the European Union and Southeast Asia.

Sino-American trade in goods declined 14% on the year to $258.3 billion, according to statistics out Friday from Chinese customs authorities. In exports, the U.S. sustained a much harder blow.

Agricultural and energy products easily sourced from elsewhere account for much of the Chinese imports from the U.S. But big Chinese exports like computers, mobile phones and other electronics have supply chains that take more time to rearrange. While Chinese exports to the U.S. fell 8% to $199.4 billion, American exports to China plunged 30% to $58.9 billion.

For June alone, Chinese exports to the U.S. fell 8% on the year to $39.2 billion as American exports to China dropped 31% to $9.3 billion.

China is looking to other major markets to fill the gap. Trade with the EU, which overtook the U.S. as its top trade partner in 2004, increased 5% on the year to $337.9 billion in the first half. Trade with the Association of Southeast Asian Nations grew 4% to $291.8 billion, topping the American tally. Should current tensions continue, the bloc could rank above the U.S. for the full year for the first time on record.

ASEAN member Vietnam enjoyed a 14% jump in exports from China. Chinese businesses are moving more parts and materials to newly set up production bases there. At least some of this is aimed at skirting American tariffs on products made in China.

An item-by-item breakdown highlights how the trade war is reshaping the flow of goods. For example, the U.S. imposed a 10% tariff on Chinese furniture last September, raising it to 25% this May. Chinese furniture exports to the U.S. fell 11% on the year to $3.7 billion for the January-May period, while those to ASEAN nations increased 30% to $1 billion.

“American clients are demanding lower prices to ease the pain of the tariffs,” an export manager at a manufacturer in Hebei Province said. “A lot of companies are starting to refuse orders from the U.S.”

U.S.-bound exports of semiconductors, on which Washington slapped a 25% tariff last year, also dropped 29% for January to May. Those to ASEAN jumped 37%.

Though not subject to U.S. tariffs, $1 billion of Chinese toys were exported to ASEAN in the five-month period, a 52% surge on the year.

Beijing and Washington resumed working-level trade negotiations for the first time in two months Tuesday, but only by phone. No face-to-face talks have been held, despite speculation that they could this week.

U.S. President Donald Trump has expressed frustration over the lack of progress. “China is letting us down in that they have not been buying the agricultural products from our great Farmers that they said they would,” he tweeted Thursday. Bilateral trade is expected to shrink even further as negotiations drag on.

Source : Nikkei Asian Review