China’s trade balance grew more than expected in May, driven by steady exports and a sharp decline in imports, although export growth still missed expectations as high U.S. trade tariffs dented overseas demand. 

Trade balance grew to a surplus of $103.22 billion in May, government data showed on Monday. The print was above expectations for a surplus of $101.10 billion, and grew from the $96.18 billion surplus in April. 

China’s exports, a key driver of the country’s massive trade surplus, still expanded in May, albeit at a slower than expected pace, while growth in exports also weakened sharply. Exports grew 4.8% year-on-year missing expectations for a 5% rise and falling from the 8.1% rise seen in the prior month.

Destinations outside the U.S. still saw strong export demand, given China’s key role in the global supply chain. Shipments to the U.S. also improved after a deescalation in trade tariffs in mid-May. 

But the country’s imports fell substantially more than expected in May, reflecting weak demand at home amid increased economic uncertainty and sluggish consumer spending. 

Chinese imports fell 3.4% y-o-y, much more than expectations for a drop of 0.9% and deepening their decline from a 0.2% fall in the prior month. 

China and the U.S. are set to hold another round of high-level trade talks in London later on Monday, after talks were seen stalling in recent weeks. 

Washington and Beijing agreed in mid-May to temporarily slash their respective trade tariffs against each other, with the U.S. bringing tariffs down to 30% from 145%, while China lowered its levies to 10% from 125%.


But the rhetoric between the two countries has remained largely abrasive, with China balking at more U.S. controls on the country’s growing chipmaking industry. The U.S. lambasted China’s restrictions on key rare earth minerals, which are expected to cause supply shortages across the globe. 

Monday’s trade data also comes just hours after Chinese inflation data showed sustained weakness in May. Consumer spending remained under pressure from heightened uncertainty over the economy, and likely drove softer imports in the country in May.

Business spending also remained on a sustained downturn, keeping China’s disinflationary trend largely in play.