Trade war impact: China's trade surplus with the US grew in 2018 but tariffs bite

China's trade surplus with the United States widened last year, data showed Monday, while the country's imports and exports fell in December as the long-running trade war begins to bite in the world's number two economy. The surplus with the US is a major source of anger within the Trump administration, which imposed tariffs on hundreds of billions of dollars worth of Chinese goods last year and has warned of more to come.

Despite the levies, exports to the United States grew 11.3 per cent last year while imports rose 0.7 per cent, expanding the surplus to USD 323.3 billion from USD 275.8 billion in 2017, customs data show. However, in a sign that the White House's measures are having an impact, China's exports to the US sank last month.

The figures come after a US delegation held three days of talks in Beijing last week in the first face-to-face meeting since Donald Trump and Chinese leader Xi Jinping in December pledged a 90-day truce to resolve the crisis.

Trump wants Beijing to buy more American goods to narrow the yawning trade gap and allow foreign players better access and protection in the Chinese market.

Traditionally China imports vast quantities of American soybeans in the second half of the year, long making it the most valuable import from the US.

But the buying fell off last year after China imposed a 25 per cent retaliatory tariff on the commodity in the summer. Total imports of soybeans fell 7.9 per cent last year to 88 million tonnes, the customs data showed.

"The overall development of China-US trade in 2018 was still relatively normal, but the trade surplus did expand slightly," said Li Kuiwen, spokesman for the customs administration. "We believe this is because China and the US are in different stages of development and it also reflects the highly complementarity nature of the economies," Li said.

The country's commerce minister told state media on Friday that China will work to straighten out trade frictions with the US this year.

China's exports to the world fell 4.4 per cent in December from a year earlier, while imports dropped 7.6 per cent, reflecting sluggish demand at home and abroad.

"With global growth set to cool further this year, exports will remain weak even if China can clinch a trade deal that rows back Trump's tariffs," said Julian Evans-Pritchard of Capital Economics. "With policy easing unlikely to put a floor beneath domestic economic activity until the second half of this year, import growth is likely to remain subdued," he said.

China's global trade volume rose last year but its surplus with the world fell 16.2 per cent to USD 351.76 billion in 2018, as imports rose 15.8 percent while exports gained 9.9 per cent.

The customs administration will work to "improve the country's business environment and expand foreign trade... In order to keep employment, the financial sector, foreign trade, foreign investment" stable, Li said, adding there are some "hidden concerns" and "uncertain external factors" for development.

With US tariffs in place, the gloomy export picture has reinforced the need for Beijing to rely on its legion of consumers to grow its economy.

But a slew of bad data has added to concerns about China's economy, which is expected to have grown around 6.5 per cent in 2018, down from 6.9 per cent in 2017 and the weakest rate in almost three decades.

China's annual passenger car sales fell last year for the first time in more than 20 years, as the trade war with the US rocked consumer confidence and Beijing reined in car financing channels.

The cost of producing goods in China's factories slowed sharply in December, a sign demand remains weak, while consumer inflation also flagged.

Official data showed the manufacturing sector contracted in December for the first time in more than two years.