China’s exports rose 4.7% in May from a year earlier, reaching $316 billion, according to official data released Monday. While this marks a record pace for the year so far, it falls short of economists’ forecasts for a 6% increase.
Sharp Drop in Shipments to the US
Exports to the United States plunged 34.4%, the largest decline since February 2020, when the pandemic first hit China. This drop came despite a temporary tariff exemption granted on May 12 that shielded some goods from duties of up to 145%.
Meanwhile, exports to other markets climbed 11%, as Chinese firms diversified away from direct US sales after the first round of Trump-era tariffs.
Stock Market and Trade Surplus
China’s benchmark CSI 300 stock index pared its gains after the data, trading up 0.2% by midday. Imports fell 3.4%, marking a third straight monthly decline, and leaving a trade surplus of $103 billion for May.
So far in 2025, China has recorded a near $500 billion trade surplus, helping shield exporters from weak domestic demand.
Rare Earth Exports Recover
The report showed a rebound in rare earth element shipments. Earlier this year, China imposed strict export licensing on items like magnet components, slowing exports and forcing some global manufacturers to halt production. Control over these critical materials is set to be a key topic at the upcoming US-China talks in London.
Vietnam and Trade Diversion
US exports to Vietnam jumped 22% to over $17 billion for the third consecutive month. Many Chinese firms are routing goods through Vietnam and other countries to avoid US tariffs. However, this rerouting has widened America’s trade deficit with those nations, complicating ongoing tariff negotiations.
Deflation and Domestic Weakness
China’s May inflation data showed continued deflation. The consumer price index fell 0.2% year-on-year, and factory gate prices dropped for the 32nd straight month. These trends highlight persistent weakness in domestic demand.
Outlook and Risks
Chief economist Zhang Zhiwei of Dot Dot Asset Management cautioned that the trade outlook is “highly uncertain.” He noted that pre-shipment stockpiling may sustain export momentum into June but warned of possible slowdowns in the second half if global trade tensions worsen.
The US has threatened to increase tariffs on China from August. Even if a ceasefire is reached in London, demand in the US and elsewhere could weaken as companies pause buying to reassess tariff risks.
