Despite the trade war, Chinese exports are holding up

In June, Chinese exports grew at a steady pace. As a result, the first half of the year ended on a positive note, with a trade surplus of $586 billion, an all-time high. This is mainly the result of front-loading, with many companies building up inventories in anticipation of tariffs. However, the second half of the year could prove more difficult, as uncertainty remains over the final level of tariff barriers.

Chinese exports exceeded expectations in June. Data released on Monday showed that Chinese exports rose 5.8% year-on-year, above the 5.0% expected and up from 4.8% in May.

Chinese imports also rebounded, rising 1.1% after contracting 3.4% in May. Economists had expected a 1.3% increase.

Nevertheless, imports remain at fairly low levels since the beginning of the year. This is due to weak demand for raw materials (agricultural and energy).

On the other hand, exports have been very strong. First, shipments were very robust in anticipation of tariffs. Then, the decline in shipments to the United States was more than offset by an increase in exports to other regions.

Sources: CEIC, ING

As a result, China's trade surplus continues to grow. In the first half of 2025, it amounted to $586 billion.

An uncertain future

While China got through the first half of the year without too much damage, the future is very uncertain. In May, the US and China agreed to a 90-day truce in Geneva. Since then, an agreement, the details of which have not been disclosed, has been reached in London. But we do not really know whether the previous deadline of August 12 still stands or whether the June agreement will prevail indefinitely.

What we can say is that this provisional tariff agreement remains fragile. The previous compromise in May was quickly undermined by a series of export controls that disrupted supply chains in several key sectors.

Beijing must now maneuver skillfully to convince Washington to ease tariffs. Analysts estimate that taxes above 35% would undermine the profitability of Chinese manufacturers. "Tariffs are likely to remain high, and Chinese manufacturers are increasingly constrained in their ability to rapidly increase their global market share by lowering prices," warns Zichun Huang, China economist at Capital Economics. She anticipates a slowdown in exports in the coming quarters, weighing on the country's growth.

Beyond direct tariffs on Chinese products, the US is trying to prevent these measures from being circumvented. Since the introduction of tariffs during Donald Trump's first term, China has been using third countries, particularly in Southeast Asia, to ultimately export its products to the US without paying tariffs.

The Trump administration now seems determined to close this loophole. The agreement reached with Vietnam in early July provides for a 20% tariff on Vietnamese products but 40% on "illegal transshipments" (goods transiting through Vietnam). However, it is still unclear how Washington will define illegal transshipment and what added value Vietnam will have to bring to imported products to avoid the 40% tax.

The fact remains that China is in Washington's sights and that US trade policy is a threat to its economy. For China, the equation is still the same: tariffs are holding back exports. Exports are the main driver of growth. The trade war therefore highlights, once again, the need to further stimulate domestic demand.