Economist Mohamed El-Erian warned of "significant challenges" for Xi Jinping's growth model after fresh data showed a sharp drop in US-China trade.
The analysis follows a CNBC report that Chinese exports to the U.S. plunged 33% in August year-over-year, a development El-Erian said shows U.S. tariffs have begun to “bite.”
China's Shipments To US Plunge 33% In August
The sharp decline in U.S.-bound shipments was the primary factor limiting China’s overall export growth to a six-month low of 4.4% in August, a figure that fell short of consensus forecasts.
In a post on the social media platform X, El-Erian also highlighted that imports from the U.S. dropped by 16%, restricting China’s total import growth to just 1.3%, which was also “worse than the consensus expectation.”
“These numbers, none of which bode well for a Chinese economy already facing significant challenges, highlight the urgent need for more concerted government efforts aimed at reforming the country’s growth model,” El-Erian stated in his post.
Tariff Workarounds Lose Effectiveness
The August trade figures, released by Chinese customs, signal that the impact of exporters’ “frontloading” shipments to get ahead of tariffs is fading.
The slowdown is also attributed to a U.S. crackdown on the transshipment of goods through third countries to sidestep the duties.
U.S. Deficit With China Grows In July
This downturn follows a July report from the U.S. Census Bureau and U.S. Bureau of Economic Analysis, which showed the American trade deficit in goods with China had widened by $5.3 billion to $14.7 billion for that month.
While its trade with Washington falters, Beijing has increasingly turned to other partners. In August, China's shipments to the European Union and Africa surged by 10.4% and nearly 26%, respectively. Despite the steep decline, the U.S. remains China's largest single-country export destination.
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