<![CDATA[Trade between US and China tumbles in first half of year, data shows, a victim of tariffs]>
The total value of bilateral trade between the United States and China dropped by nearly 14 per cent in the first half of the year versus the same period in 2018, data from the US Commerce Department showed on Friday.
The change is a clear effect of the trade war between the world's two largest economies, analysts say.
In the first six months of the year, combining exports and imports as a measure of total trade between the US and China, the total amount of goods exchanged was US$271 billion versus US$314 billion in 2018.
As a result, China fell from being the top bilateral trading partner with the United States, and now ranks behind Mexico and Canada.
"So tariffs are having an effect on bilateral trade," said Michael Englund, chief economist at Action Economics in Boulder, Colorado.
"It is a policy goal of reducing the trade deficit with China, but the reality is we will likely just shift to different countries, and as a result the US might not see an overall change in the trade balance."
Overall in June, the US trade deficit narrowed by just 0.3 per cent to US$55.2 billion, the Commerce Department said in its monthly statement. May's trade data was revised to show a slightly smaller deficit of US$55.3 billion versus the US$55.5 billion initially reported.
The US and China have been in a trade dispute for more than a year, with each side imposing tariffs on hundreds of billions of dollars worth of goods.
On Thursday, after muted trade talks in Shanghai earlier in the week, US President Donald Trump announced that he would impose a 10 per cent tariffs on US$300 billion more of Chinese imports starting on September 1. China vowed retaliation, saying it would not be bullied.
"China, to the extent that they have used management of their imports from the US as an effective negotiating tool, well, they have cut those imports significantly. But their ammunition is limited because of the overall low level from years of avoiding US imports," Englund said.
In the month of June alone, the goods trade deficit with China narrowed by 0.8 per cent to US$30 billion, with imports falling 0.7 per cent and exports largely unchanged.
The largest US trade deficit was with China, followed by Mexico, from January through April. Graphic: SCMP alt=The largest US trade deficit was with China, followed by Mexico, from January through April. Graphic: SCMP
"Given tariff activity, we have seen companies move production sources from China to other countries where possible," said David Silverman, senior director at Fitch Ratings.
"This will help avoid tariffs, though in some cases these companies could see higher manufacturing or shipping costs, and create execution risk related to new factory partners."
"Tariffs are expected to have a generally negative impact on both consumer spending and consumer industry P&Ls [profit and loss] because those cost increases will be borne across manufacturers, retailers and consumers," he said.
"Discretionary categories like apparel and consumer electronics could see more volume dislocation than staple categories like household products and personal care."
In the first half of the year, while US trade with China shrank, it grew 2.8 per cent with Mexico to a total of US$309 billion. The trade deficit with Mexico reached a record in June. US-Canada bilateral trade narrowed by 2 per cent to US$307 billion, US government data shows.
This article originally appeared on the South China Morning Post (SCMP).
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