China's monthly trade surplus with the US rose to a record high in June, underlining the imbalance at the heart of an escalating trade war between the world's two largest economies.
The trade surplus with the US stood at $28.97bn (€24.9bn), the highest of any month in data going back to 1999. Exports climbed to $42.62bn, also a high, the customs administration said yesterday.
While multiple factors will have influenced the data, including a rush by some manufacturers to sell goods before tariffs imposed this month hit, there's little sign that the US deficit with China will improve any time soon. As tax cuts fuel the US expansion and a slowing Chinese economy may cool domestic demand, the gap will continue to provide the backdrop to the standoff.
"The record bilateral surplus shows exactly that the US economy is robust while that of China is weakening," said Wang Jian, a Shanghai-based economist at Shenwan Hongyuan Group.
"China's domestic investment is softening due to funding strains, while consumption is not particularly strong either."
Both China and the US imposed 25pc tariffs on $34bn of the other's imports last week, and Beijing has vowed to fight back against proposed tariffs on an additional $200bn in Chinese goods.
"The effects of the trade war on China's exports are likely to be more pronounced from July," said Bloomberg's China economist Fielding Chen. "The hit to growth from the current US tariffs though, is likely to be limited."
The yuan's decline in June was the worst in any month since 1994, dropping more than 3pc against the dollar. While that ought to help exporters in the longer run, the yuan's fall now is a sign of growing concern as the trade war arrives at a time when the economy is already slowing.
President Xi Jinping may ultimately have to choose between softening his multi-year campaign to control debt levels, or letting growth dip below the target of 6.5pc.
The trade data comes ahead of the GDP report for the second quarter, which should give a more complete picture of how the world's second-biggest economy did in the first half. Economists are forecasting a slight slowing of the quarterly growth pace to 6.7pc from 6.8pc.
"Both imports and exports have seen robust growth in the first half as companies front-load orders ahead of the trade war, resulting in nice-looking year-to-date trade data, but the momentum is hardly sustainable in the future," said Ding Shuang, chief economist of Greater China & North Asia at Standard Chartered Bank.
He said China still has solid domestic demand despite the decline in import growth.