Broker: UOB Kay Hian
Date of Report: 10 June 2025

China’s Trade Outlook 2025: Export Slowdown and Tariff Pressures Shape the Economic Landscape

Overview: Trade Performance Under Pressure Amid Rising US Tariffs

China’s trade momentum faced notable headwinds in May 2025, as export growth decelerated significantly, driven primarily by a sharp collapse in shipments to the US. Despite some resilience in other markets, the overall outlook remains cautious, with imports also contracting across key commodities. Recent tariff escalations and a temporary Sino-US truce have contributed to a climate of uncertainty and front-loading of export demand.

Exports: Growth Slows as US Market Collapses

– Export growth in May slowed to 4.8% year-on-year (yoy), a marked decline from April’s 8.1% yoy and below market expectations of 6.0% yoy. – Exports to the US plunged by 34.5% yoy, falling to US\$28.8 billion—an acceleration from April’s 21.0% yoy drop. – Exports to the EU demonstrated strength, rising 12% yoy to US\$49.5 billion. – Shipments to Hong Kong climbed 11.4% yoy, while exports to the ASEAN region maintained robust momentum at 14.8% yoy, albeit moderating from April’s 20.8% yoy surge. – These trends suggest a clear diversion of trade away from the US, with Chinese exporters seeking alternative markets amid tariff headwinds.

Imports: Broad-Based Contraction Across Commodities

– Imports contracted by 3.4% yoy in May, deepening from a 0.2% yoy decline in April and missing expectations of a 0.8% yoy contraction. – Key commodity imports saw steep declines: – Coal imports plunged over 40% yoy, worsening from April’s -34.0% yoy. – Crude oil imports fell 18.0% yoy, following a 14.9% yoy drop in April. – Iron ore imports shrank 9.9% yoy, compared to -6.2% yoy previously. – Copper ore imports were a rare bright spot, growing 15.7% yoy, though this marked a sharp slowdown from the 45.9% surge in April. – Agricultural product imports turned positive at 0.7% yoy, rebounding from a -17.2% yoy contraction in April.

Product Categories: Mixed Performance Amid Trade Tensions

– Motor vehicle exports rebounded strongly to 15.2% yoy growth, up from 5.5% yoy in April. – Hi-tech product exports and mechanical & electrical product exports both moderated, reflecting the broader impact of trade tensions on China’s technology sectors. – Integrated circuits imports increased by 8.9% yoy, down from 11.1% yoy previously.

Trade Surplus Expands Despite Weakness in Trade Flows

– The overall trade surplus widened from US\$96.2 billion in April to US\$103.2 billion in May. – The expansion is attributed to the sharper fall in imports versus exports, despite the challenging global trade environment.

Key Financial Data Table: May 2025 Trade Snapshot

Market Implications and Outlook

– The data from May 2025 clearly underscores the adverse impact of higher US tariffs on China’s export engine. – Despite a 90-day truce in Sino-US tariffs, the near-term export outlook remains subdued due to front-loading effects, with demand having been pulled forward to avoid higher costs. – The resilience in exports to the EU, Hong Kong, and ASEAN provides some support, but is not sufficient to offset the sharp losses in the US market. – The contraction in imports across nearly all major commodities signals weaker domestic demand and industrial activity. – Technology sectors, including hi-tech and mechanical & electrical products, are especially vulnerable to ongoing trade tensions.

Conclusion

China’s trade performance in May 2025 paints a picture of resilience in the face of adversity, but also highlights significant vulnerabilities amid escalating global trade tensions. The sharp downturn in exports to the US is only partially offset by gains in other markets. Meanwhile, broad-based import declines and moderation in technology-related trade sectors underscore the challenges ahead. Investors and analysts should closely monitor developments in tariff negotiations and demand trends in both domestic and global markets to gauge the direction of China’s trade and economic trajectory.

Analyst Contacts

– Tham Mun Hon, CFA: +852 2236 6799, munhon.tham@uobkayhian.com.hk – Claire Wang: +852 2236 6761, claire.wang@uobkayhian.com.hk