Donald Trump has claimed that his tariff battle with China is working after official data from Beijing showed growth in the world’s second biggest economy dropping to its slowest pace since 1992.
The US president said the impact of his protectionist measures had been to cause an exodus of companies from China, as Beijing announced that its annual rate of expansion had slowed from 6.4% to 6.2% in the second quarter of 2019.
In tweets that were immediately challenged by economists, Trump said his tough action had forced China’s leaders to the negotiating table.
Responding to evidence that trade tension was one factor behind the slowdown, Trump said: “China’s 2nd Quarter growth is the slowest it has been in more than 27 years. The United States Tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. Thousands of companies are leaving. This is why China wants to make a deal….
“…with the U.S., and wishes it had not broken the original deal in the first place. In the meantime, we are receiving Billions of Dollars in Tariffs from China, with possibly much more to come. These Tariffs are paid for by China devaluing & pumping, not by the U.S. taxpayer!”
The US has imposed tariffs on $250bn (£199bn) worth of Chinese goods including chemicals and machinery, while China has placed import levies on $110bn of US goods such as soybeans.
Economists pointed out that China’s economy was still growing four times as fast as that of the US and that the tariffs imposed on Chinese goods were hitting Americans. Trevor Greetham at Royal London Asset Management said: “Sorry to break it to you but tariffs are paid by the importer – US taxpayers in this instance.”
The 6.2% GDP figure was within the government’s target range of 6.0%-6.5% for the year, down from the 6.6% growth China posted in 2018.
“Economic conditions are still severe both at home and abroad, global economic growth is slowing down and the external instabilities and uncertainties are increasing,” said bureau of statistics spokesman Mao Shengyong.
“The economy is under new downward pressure,” he said.
Beijing has introduced measures this year to boost the economy, but they have not been enough to offset a domestic slowdown and softening overseas demand made worse by a punishing trade war with its biggest trading partner country, the US.
Exports to the world rose only 0.1% during the first six months compared with the same period last year.
Analysts widely expect Beijing to step up support for the economy in coming months and the prospect cheered investors in China where stocks rose.
Economists were not convinced that it would have a decisive impact.
Julian Evans-Pritchard, senior China economist at the consultancy Capital Economics, said he doubted more supportive fiscal policy would mark the start of a turnaround and that Beijing’s leaders faced more weakness in the economy.
“We think that construction activity will come under pressure in the coming quarters as the recent boom in property development unwinds,” he said. “Combined with increasing headwinds from US tariffs and weaker global growth, we expect this to culminate in a further slowdown in economic growth over the coming year.”
According to the official data, industrial output rose 6.3% in June, from 5.0% in May, which had been the slowest increase since 2002.
But growth in infrastructure investment has retreated from years of near 20% expansion – coming in at 4.1% growth in January-June – and imports and exports both shrank in June from a year earlier.
Urban unemployment ticked up to 5.1% for the month, from 5.0% in May.
China’s 1.3 billion consumers have continued to provide support for the economy with retail sales up 9.8% on-year in June, up from 8.6% in May.
Sales of big-ticket items such as cars have not held up, though, with sales down 12.4% in the first half of the year, according to the China Association of Automobile Manufacturers.