China exports soar ahead of Donald Trump’s tariffs

Good morning and welcome back to FirstFT Asia. On today’s agenda:

• The latest on the US-China trade war

• India’s middle-class debt crisis

• Why Xi holds a stronger hand than Trump

China’s exports surged last month in a sign of the rush to dispatch shipments before Donald Trump’s “liberation day” tariffs triggered a full-blown trade war between the world’s two largest economies.

What happened: Exports rose 12.4 per cent in dollar terms in March on a year earlier, figures from China’s customs administration showed yesterday, well above expectations and the biggest rise since October. Imports fell 4.3 per cent. The Trump administration had already imposed additional tariffs of 20 per cent on China in March, before a dramatic tit-for-tat escalation that drove levies on each other’s goods well above 100 per cent.

Washington last week paused sweeping “reciprocal” tariffs on its other trading partners while raising them on China as it sought to isolate Beijing, which on Friday retaliated by increasing its own measures to 125 per cent. But China’s customs administration spokesperson Lu Daliang said “the sky won’t fall”, according to state media, as he pointed to “vast” domestic demand and reiterated a wave of official comments that emphasised the country’s resilience.

What analysts said: While the March data showed a jump in exports, economists expect a different environment in coming months in light of the trade war. Goldman Sachs cut its real GDP growth forecast for China last week to 4 per cent, from 4.5 per cent, citing “sharply declining exports to the US”.

“We think it could be years before Chinese exports regain current levels,” said Julian Evans-Pritchard, chief China economist at Capital Economics, adding that there were “already signs of shipments being rerouted via third countries”.

Xi Jinping courts south-east Asia: China’s leader warned US protectionism would “lead nowhere” as he embarked on a tour of Vietnam, Malaysia and Cambodia to strengthen ties with export-reliant economies in a region rattled by Trump’s escalating trade war. The tariff uncertainty has unsettled many south-east Asian countries, which have high trade surpluses in goods with the US because of their low-cost exports. Global supply chains had moved to the region in recent years, notably to Vietnam, in an effort to diversify from China and avoid US tariffs.

Here’s what else we’re keeping tabs on today:

• Economic data: India reports March CPI inflation figures and South Korea publishes revised trade data for the month.

• China Import and Export Fair: The gathering, also known as the Canton Fair, begins in Guangzhou.

Five more top stories

1. America’s risky corporate borrowers have been shut out of the bond market since Trump’s tariff blitz, in a freeze that is reverberating across Wall Street and threatens a tentative rebound in dealmaking. Lowly-rated companies have failed to sell any debt in the $1.4tn US high-yield bond market since Trump unleashed market turmoil and raised fears of a US recession with the wave of tariffs he announced earlier this month.

2. Sony is raising the price of its PlayStation 5 game console in several markets including Europe and the UK in what analysts said was an attempt to get ahead of Trump’s tariffs. A significant proportion of the Japanese group’s PS5 production is located in China, which faces US tariffs of up to 145 per cent. Read more about Sony’s “challenging economic environment”.

3. El Salvador’s President Nayib Bukele says he will not return a man wrongly deported to his country from the US in a move that is likely to complicate the stand-off between Trump and the American judiciary. The Supreme Court last week directed the federal government to “facilitate and effectuate the return of” Abrego Garcia, a Salvadoran citizen who was sent to a notorious maximum-security prison in El Salvador last month as a result of what Trump officials have called “an administrative error”.

4. The European Commission is issuing burner phones and basic laptops to some US-bound staff to avoid the risk of espionage, a measure traditionally reserved for trips to China. Commissioners and senior officials travelling to the IMF and World Bank spring meetings next week have been given the new guidance, according to four people familiar with the situation. Here’s what else we know about the EU’s spying fears.

5. Meta’s acquisitions of Instagram and WhatsApp helped give it “monopoly power”, the US Federal Trade Commission told a court yesterday at the start of a blockbuster trial that could force the $1.5tn tech giant’s break-up. The case is expected to give the clearest signal yet about the Trump administration’s stance on antitrust policy — and its appetite to take on Big Tech.  

The Big Read

A debt crisis is brewing among India’s middle-class, a supposedly growing segment of society that bankers and consultants regularly highlight to sell the investment potential of the world’s most populous nation. Retail lending has surged as consumers use credit to finance aspirational purchases and soaring living costs following the coronavirus pandemic. But a day of reckoning is fast approaching.

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We’re also reading . . . 

• US-China trade war: Trump has a weaker hand than he thought in the game of tariff poker that he is playing with China, writes Gideon Rachman.

• Standing up to Trump: With just weeks to go before a snap election, Canada’s Prime Minister Mark Carney has been positioning himself as an antidote to the US president.

• Luxury downturn: LVMH’s sales fell sharply in the first quarter, striking a downbeat note for the luxury industry as it braces for the fallout from Trump’s tariffs.

Chart of the day

Goldman Sachs chief executive David Solomon expressed optimism the Trump administration would heed warnings from corporate America that a tit-for-tat trade war could threaten the global economy. The Wall Street bank yesterday reported first-quarter results boosted by the market volatility that has accompanied Trump’s return to office.

Take a break from the news

Peruvian author Mario Vargas Llosa, a towering figure of Latin American literature, died on Sunday in Lima aged 89. He was best known for his 1969 novel Conversation in the Cathedral, which examined Peruvian society in the 1950s under the military dictatorship of Manuel Odría. He was awarded the Nobel Prize for literature in 2010.