In June, China’s export activity picked up pace as companies scrambled to secure orders amid a temporary trade truce between Beijing and Washington. This came ahead of an upcoming deadline next month, with shipments to transit hubs in Southeast Asia being notably robust.

Firms on both sides of the Pacific are keenly observing to see if the globe’s two largest economies can establish a more stable arrangement, or if global supply chains will yet again be disrupted by the reintroduction of tariffs exceeding 100%.

Chinese manufacturers, grappling with sluggish domestic demand and tougher conditions in the U.S. — where they export goods valued at over $400 billion each year — are also diversifying their strategies by striving to expand market share in nearby economies.

Customs data on Monday showed outbound shipments from China rose 5.8% year-on-year in June, beating a forecast 5.0% increase in a Reuters poll and May’s 4.8% growth.

“There are some signs that frontloading demand is beginning to wane gradually,” said Chim Lee, senior analyst at the Economist Intelligence Unit. “While frontloading ahead of the August tariff pause deadline is likely to continue, freight rates for China-bound shipments to the US have started to decline.”

“Trade diversion and rerouting appear to be continuing, which will attract the attention of policymakers in the US and other markets,” he added.

Imports rebounded 1.1%, following a 3.4% decline in May. Economists had predicted a 1.3% rise.

The upbeat set of data helped lift market sentiment with the blue-chip CSI300 up 0.2% at the midday trading break, while the Shanghai Composite Index gained 0.4%, nearing its highest level since October.

Analysts and exporters are watching to see whether a deal agreed in June between US and Chinese negotiators will hold, after an earlier agreement reached in May was strained by a series of export controls that disrupted global supply chains for key industries.

Exports to the US grew 32.4% month-on-month, with June the first full month of Chinese goods benefiting from reduced US tariffs, although year-on-year growth remained negative.

Meanwhile, outbound shipments to the 10-member Association of Southeast Asian Nations jumped 16.8%.

China’s June trade surplus came in at $114.7 billion, up from $103.22 billion in May.

China’s rare earths exports rose 32% in June from the month before, the customs data showed, in a sign that agreements struck last month to free up the flow of the metals were possibly bearing fruit.

But Chinese negotiators will struggle to talk the US into bringing tariffs down to levels that enable producers to turn a profit, analysts say, warning additional duties that exceed 35% will wipe out margins.

“Tariffs are likely to remain high and Chinese manufacturers face growing constraints on their ability to rapidly expand global market share by slashing prices,” said Zichun Huang, China economist at Capital Economics.

“We therefore expect export growth to slow over the coming quarters, weighing on economic growth,” she added.

GLOBAL TRADE WAR

Beijing faces an August 12 deadline to reach a durable deal with the White House.

In the meantime, Trump continues to broaden his global trade offensive with new tariffs on other partners.

Analysts warn those measures could indirectly hurt Beijing by pressuring third countries used heavily for transshipments of Chinese goods.

Trump recently unveiled a 40% tariff on US-bound transshipments through Vietnam, a move that could undermine Chinese manufacturers looking to reroute shipments and avoid higher duties.

The US president has also threatened a 10% charge on imports from BRICS countries, in which China is a founding member, raising further risks for Beijing.

Backing its fellow BRICS member, China’s soybean imports in June hit a same-month record high, buoyed by a surge in purchases from top supplier Brazil to 9.73 million tons, which Trump has slapped with 50% tariffs. Imports of U.S. soybeans, meanwhile, were just 724,000 tons.

China’s crude oil imports rebounded last month and reached the highest daily rate since August 2023, after refineries from Saudi Arabia and Iran increased operations. Iron ore imports climbed 8% from May.