UBS Economics-China Economic Perspectives _Modest trade slowdown in May, w...

ab9 June 2025Global ResearchChina Economic PerspectivesModest trade slowdown in May, with more to come Negative export growth surprise Export growth slowed to 4.8% YoY in May from 8.1% YoY in April, a negative surprise to the consensus expectation of 6.0% growth. On a seasonally adjusted basis, our preliminary estimate suggests the shipment level expanded 0.7% MoM in May, following greater than 1.0% contraction in April. The sequential shipment expansion led to further strength in export momentum (percentage; 3m/3m). In summary, the shipment level may have picked up and export momentum may have strengthened, but the sequential improvement was not enough to support headline YoY growth. Furthermore, we estimate real export growth moderated to 7.9% YoY in May from 13.0% YoY in April. Shipments to the US contracted further despite tariff de-escalationWe estimate the shipment level to the US contracted another 4.7% MoM in May after registering one of the sharpest falls in history in April, at more than 26% MoM. Further sequential contraction in May led to wider YoY contraction of 34.6% (vs. -21% YoY in April). China and the US agreed to tariff de-escalation on 12 May, with the incremental reciprocal tariff rate against imports from China lowered to 10% from 125% (including a 90-day suspension of a 24% rate out of the 34% individualized higher reciprocal tariff rate). However, the blanket 20% tariff rate under the Executive Order for the Synthetic Opioid Supply Chain remains and the additional tariffs under section 232 for steel, aluminum and auto products also remain. Adding the previous tariffs from the first Trump administration and the Biden administration, we estimate the weighted ad valorem tariff rate at 43.5% after the Geneva talks vs. 110% previously. Some news reports have observed rushed shipments from China to the US after the tariff agreement, with importers and exporters taking the opportunity of a lower tariff window, given still-elevated uncertainty. The overall monthly shipments did not confirm that. It is possible that rushed shipments after 12 May are not sufficient to fully compensate for the gap left in the earlier part of month, given the high tariffs. Furthermore, as overall tariffs against exports from China are still higher than for other economies, the rushed shipments may only occur in certain areas; thus, they may not easily be reflected in the overall monthly data for May. Exports to other developed markets improved Interestingly, the shipment level to other developed market destinations generally expanded during the month. For example, shipments to the EU registered significant sequential expansion, pushing headline growth to 11.9% YoY from 8.2% in April. The shipment levels to Japan and Canada also expanded sequentially. Shipments to other exporters in Asia softened to a still-resilient levelOne the key factors supporting mainland China’s export growth in April involved shipments of input materials and component