China's trade surplus just narrowed -- but not with the United States

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China and the European Union (EU) have both voiced their firm objections to USA tariffs on steel and aluminum, and are expected to collaborate more closely to uphold multilateralism and free trade.

China's Ministry of Commerce stressed on Thursday that the nation is willing to expand imports from the U.S. if they can meet "halfway" in trade negotiations.

China's exports to the United States rose 13.6 per cent in the first five months of 2018 from a year earlier, compared with a 13.8 per cent rise in January-April.

"China and the U.S. carried out in-depth and concrete discussions in some specific areas of trade cooperation, especially agricultural products and energy", said Gao Feng, the ministry's spokesman, when asked about the $70 billion figure.

China's trade surplus just narrowed -- but not with the United States
China's trade surplus just narrowed -- but not with the United States

Justin Yifu Lin, former chief economist and senior vice-president of the World Bank from 2008 to 2012, said the USA should be aware that exporting more energy and agricultural products to China will not fundamentally change the situation of the trade deficit with China, and what China wishes to import from the U.S. is its high-tech products and related services.

Shortly after the end of the exemption, the European Union initiated a dispute with the United States at the WTO, and announced Wednesday the start of applying rebalancing duties on US products in July, as part of the "three-pronged response".

Trade is also expected to dominate upcoming G7 talks - which do not include China - with Canada and leading European nations warning Trump they will not back down over tariffs.

China held a series of trade talks with the USA last month.

Overall, exports jumped 12.6% in May, which was slightly slower than in April, China's General Administration of Customs reported on Friday.

Despite some positive signs for a trade deal with the United States, analysts cautioned China faced other trade hurdles.

"The particularly strong May figures are due to uncertainties from the trade negotiations", said Iris Pang, an economist at ING Groep NV in Hong Kong and the only accurate forecaster of May import growth in a Bloomberg survey.

That sharp deceleration is also evident in the combined value of goods and services exported between the US and China, where a positive trend for growth has suddenly started to look like the potential beginning of an economic top. That's up more than 10 percent from the level a year earlier. Our second chart shows the combined value of that trade in terms of USA dollars for each month over the past 10 years, along with its trailing-twelve month average.

China and the United States had appeared to have been on the verge of a truce over trade until the White House warned in late May that it would pursue tariffs on $50 billion worth of Chinese imports, as well as impose restrictions on Chinese investments in the United States and tighter export controls.

Beijing has cut import duties on automobiles and some consumer goods and to ease curbs on foreign ownership in its auto industry.