China Imports Slump in Combined January and February Data; AUD/USD Slides

China’s Trade Terms Under Scrutiny Amid Escalating US-China Trade War

On Friday, March 7, trade data from China drew market scrutiny after better-than-expected private sector PMI numbers for February. The numbers take on added significance following December’s front-loading of shipments and President Trump’s recent tariff hikes on Chinese goods.

China Reports Import Slump and Weaker Export Growth

China’s exports rose just 2.3% year-on-year in January and February after surging 10.7% in December. Softer exports signaled weakening demand amid expectations of additional US tariffs on Chinese goods. Meanwhile, domestic demand deteriorated sharply, with imports sliding 8.4% year-on-year in January and February after a 1% increase in December.

The slump in imports led to a widening in China’s US dollar trade surplus from $104.84 billion to $170.5 billion.

While markets may expect a pullback in overseas demand, import trends typically raise concerns about domestic demand. However, Beijing’s recent pledges to boost domestic consumption could mitigate the impact of weak demand on China’s economic growth and investor sentiment.

 

The Market Reaction to China’s Trade Data

Markets responded swiftly to the trade data, with equities and forex markets reflecting shifting sentiment.

The Hang Seng Index briefly fell to a post-trade report low of 24,330 before rising to a high of 24,448. On Friday, March 7, the Index was up 0.08% to 24,389 for the morning session.

In the forex market, the AUD/USD pair reacted more negatively to weakening demand signals, sliding from $0.63143 to a post-report low of $0.63086. On March 7, the AUD/USD was down 0.33% to $0.63112.

The Aussie dollar is particularly sensitive to Chinese economic data. Australia has a trade-to-GDP ratio exceeding 50%, with China accounting for one-third of its exports. This exposure leaves the Aussie vulnerable to US-China trade tensions and weakening demand for Chinese goods.

What’s Next? US Tariffs Take Effect on Tuesday

Traders must monitor tariff developments closely. An escalation in the US-China trade war could impact risk sentiment. China’s Foreign Minister Wang Yi addressed the situation, reportedly stating:

“We still stabilize an uncertain world with certainty of China.”

In response to new US tariffs, he added:

“China will definitely take countermeasures in response to arbitrary pressure.”

While US President Trump recently eased tariffs on Canada and Mexico, Monday’s tariff hikes on Chinese goods remain effective.

Discover strategies to navigate this week’s market trends here.