(Yicai) Nov. 17 -- Despite the shockwaves from US President Donald Trump’s tariffs this year, global trade has actually grown faster than expected and China’s export performance has been especially strong. China’s share of global goods exports hit a historical high of 14.2 percent in the first half, according to statistics from the World Trade Organization.

In the context of increasing uncertainty, what is behind the resilience of China’s exports? This article looks at two key factors, namely the diversification of China’s export markets and the upgrading of its export product mix.

Tariff Fallout

Trump triggered the first round of China–US trade tensions during his first term in office. After returning to the White House early this year, he launched a new wave of tariff hikes. Although this round covers a wider range of goods, China, as a major source of America’s trade deficit, is taking the brunt of the fallout.

In the early stages of the previous conflict, China’s exports to the US held up relatively well. It was not until December 2018 that year-on-year export growth to the US turned negative. But because the intensity of this year’s tariff tiff is far greater than during Trump’s first term, the decoupling of China-US trade has sped up significantly.

China’s exports to the US have been tumbling year-on-year since April and have plunged by double digits for seven straight months. For the first 10 months, exports to the US slumped 17.8 percent. However, because China’s reliance on the US market has fallen, from about 20 percent of total exports in 2018 to around 10 percent now, the overall hit from the tariffs has been much more manageable. Over the first 10 months, shrinking exports to the US shaved 2.6 percentage points off China’s overall export growth.

Diversified Markets

Since the last tariff conflict, China has been ramping up exports to non-US markets, and this shift accelerated this year as the new tariffs landed. In the first 10 months, exports to the Association of Southeast Asian Nations and African countries surged 14.3 percent and 26.1 percent respectively, contributing 2.3 and 1.3 percentage points to overall export growth.

Meanwhile, thanks to a pickup in European demand and deeper China–European Union cooperation, exports to the EU climbed 7.5 percent over the same period, adding 1.1 percentage points to overall growth.

Upgraded Export Mix

China divides its exports into four main categories, namely agricultural products and minerals, primary industrial goods, advanced industrial goods and others. Industrial goods account for the majority of exports, and since 2023 the share of advanced industrial goods has been growing rapidly.

In September, advanced industrial goods accounted for 53.3 percent of China’s exports, up 1.3 percentage points from a year earlier and a record high. The main drivers were machinery, electrical and audiovisual equipment as well as transportation equipment. Their shares climbed 0.8 percentage point and 0.5 percentage point respectively to 42.6 percent and 8.5 percent.

In the first nine months, China’s exports of advanced industrial goods surged 9 percent from the year before, contributing 4.8 percentage points to overall export growth. Of this, the growth rate of machinery and audiovisual equipment jumped 4.9 percent and that of transportation equipment soared 11.8 percent, adding 3.7 percentage points and 1 percentage point respectively to overall export growth.

The continued upgrading of China’s export structure reflects the rapid transformation of its manufacturing sector and an improvement in international competitiveness.

Manufactured industrial goods fall into four categories, namely labor- and resource-intensive, low-skill and technology-intensive, medium-skill and technology-intensive, and high-skill and technology-intensive, according to the classification by the United Nations Conference on Trade and Development.

Last year, China accounted for 20 percent of the world’s exports of industrial goods, up from 17.5 percent in 2018. Of this, its global share of low-skill and technology-intensive as well as medium-skill and tech-intensive goods jumped 5.4 percentage points and 5.9 percentage points respectively from 2018 to reach record highs of 24.9 percent and 19.8 percent respectively.

Resilience With Risks

Although China’s exports to non-US markets have increased and bolstered its exports, much of this growth is driven by intermediate goods, which means these markets are not the final destinations for Chinese exports.

Take Vietnam as an example. In 2023, intermediate goods made up 71.5 percent of China’s exports to Vietnam, up from 68.6 percent in 2018. Meanwhile, Vietnam’s exports to the US are dominated by consumer and capital goods, which together account for 73.7 percent. This shows that many of the intermediate goods China sells to Vietnam eventually end up in the US after processing.

This means that while shifting exports to non-US markets can ease pressure in the short term, there is considerable uncertainty about whether these markets can support China’s exports over the medium and long term. Ultimately, this will depend on demand and trade policies in Western countries, and particularly the US and Europe.

In addition, weak domestic demand and intensified competition have pushed down China’s export prices since 2023. The trend of using low prices to boost sales volume is persisting, which may further fuel trade protectionism against China in other countries.

Looking ahead, in line with China’s 15th Five-Year Plan which runs from 2026 to 2030, the country will continue pushing ahead with economic reform. Efforts will be made to accelerate the establishment of a robust domestic economic cycle to offset uncertainties in global trade.

(The author, Guan Tao, is chief global economist at BOC International China.)

Editors: Dou Shicong, Kim Taylor