China's U.S. dollar-denominated trade surplus widened 63.9% year over year in July, on the back of an unexpected rebound in exports after a decline in June, data from the country's General Administration of Customs showed.
Exports rose 3.3%, defying market expectations for a fall in July, while imports declined 5.6%, a stronger reading than the consensus forecast for a drop of 8.3%. Trade surplus in July totaled US$45.06 billion.
The U.S. is set to impose a 10% tariff rate on $300 billion worth of Chinese exports in September, while the Chinese central bank fixed the yuan above 7 per dollar for the first time since April 2008, potentially escalating bilateral trade tensions.
"Shipments in and out of China held up better than expected last month, but a sustained turnaround still looks unlikely in the near-term," according to Capital Economics.
Yuan-denominated trade surplus expanded 79% year over year in July to 310.26 billion yuan, with exports climbing 10.3% annually to 1.53 trillion yuan and imports rising 0.4% to 1.21 trillion yuan.
For the first seven months of 2019, China's foreign trade surplus was up 47.4% year over year to 1.55 trillion yuan, as exports increased 6.7% and imports rose 1.3%.
"We think that imports could receive some support from domestic demand, as it stabilizes later this year supported by macro policy easing," said Tommy Wu of Oxford Economics. However, it may not be enough to offset the effects of mounting trade uncertainties.
China's exports are expected to remain under pressure in the coming quarters, Capital Economics said, as further U.S. tariffs will likely overshadow any support from a weaker yuan.
In the first seven months of 2019, China's trade surplus with the U.S. expanded by 11.1% on an annual basis to 1.15 trillion yuan. Exports to the U.S. fell 2.1% year over year to 1.62 trillion yuan, while imports from the U.S. dropped 24% to 473.93 billion yuan.
The U.S. was China's third-largest trading partner over the seven months, data showed, even as the two economic giants remained tangled in a trade war.
As of Aug. 7, US$1 was equivalent to 7.06 Chinese yuan.