The US trade war on China has hit this country’s trade most; it’s not China

An aerial view of Singapore’s portAn aerial view of Singapore’s port

The U.S. trade war on China appears to be hurting China’s imports from the U.S. more than China’s exports to the U.S., Maybank Kim Eng said in a note on Monday, although it added that Southeast Asia appears to be benefiting.

Over the May-to-September period, China’s exports to the U.S. grew at a pace of more than 10 percent each month, while China’s imports from the U.S. were “collapsing,” the brokerage said. That was particularly true of soybeans, petroleum products and cars imported from the U.S., it said.

It’s sent China’s bilateral trade surplus with the U.S. to a record high of US$34 billion in September, while U.S. exports to China dropped 14 percent in August to a two-year low, it noted.

To be sure, companies may be front-loading their imports into the U.S. to beat the Trump administration’s hike in tariff rates, which will rise to 25 percent from 10 percent at the beginning of the new year, the brokerage said.

It pointed to the divergence in container rates, with China-U.S. routes’ freight rates rising to a four-year high, while China-Europe routes, where there have been no tariff changes, remaining stagnant.

But Maybank KimEng said it’s also clear the U.S. trade war is disrupting the electronics supply chain, which is centered on Northeast Asia, including China, with PMIs there falling. At the same time, Southeast Asia’s exports of products targeted by the U.S. tariffs on China performing strongly, it said.

“There are also visible signs of greater FDI into ASEAN, particularly Vietnam, Thailand and Malaysia, as firms adopt a more flexible production network outside China to circumvent the tariffs,” it said. ASEAN stands for Association of Southeast Asian Nations.

In addition, it noted that China’s car imports from Germany and Japan jumped in July after the mainland cut auto-import tariffs for those countries to 15 percent from 25 percent, while auto imports from teh U.S. were raised to 40 percent in July in retaliation from U.S. tariffs.

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