China's exports beat forecast; new US trade spat raises risk

China's export growth bounced back in September, but renewed trade threats from Beijing and Washington have rekindled worries about jobs and further deflation in an economy heavily reliant on selling its manufactured goods overseas.

- JOE CASH ELLEN ZHANG

The world's second-largest economy has greatly diversified its export markets this year to insulate itself from US President Donald Trump's 35-percentage-point tariff hikes, helping to keep GDP growth on track towards a roughly 5% target for the year.

However, this strategy could get a reality check should Trump carry out his threat of reimposing triple-digit tariffs on China in retaliation for Beijing announcing sweeping rare earth export controls last week.

"While China's economy has proven more resilient in the face of US tariffs than many had feared, there is still significant potential downside from a deeper rift with the US," said Capital Economics analyst Julian Evans-Pritchard.

China's exports rose an annual 8.3% last month, customs data showed yesterday, beating a 6% increase in a Reuters poll and registering the fastest growth since March. They compared with a 4.4% increase in August.

While the faster export growth is welcome news for a still-fragile economy, Trump's latest threat to raise US tariffs above 100% would deal a deflationary shock to China and put smaller exporters and jobs of factory workers at risk.

China's chokehold on rare earths and magnets, where its near-monopoly position gives it great leverage in the trade war, could also paralyse global supply chains in industries from autos to green energy and aircraft.