China's manufacturing sector is included in the nation-wide "Market Access Negative List." Photo: AFP
Factory activity has picked up in China despite the Covid-19 crisis sweeping the globe. Photo: AFP

As Washington and Beijing wade boldly back into a trade war quagmire, both governments are broadcasting a clear message: “our economy is booming and can withstand a protracted battle if necessary.”

Economic data for disgruntled trading partners, released Wednesday, shattered that picture. US retail sales and industrial production unexpectedly fell in April, news which came shortly after China reported slowing factory production, retail sales and fixed asset investment in the same month.

The chill blowing over the two economies arrived before US President Donald Trump’s surprise announcement in early May that he would substantially raise the tariff rate on $200 billion of Chinese goods, which was followed by China’s decision to retaliate.

The US president may have been preparing for the eventuality of such news when he suggested, again, that the Federal Reserve should inject monetary stimulus to help the United States “win” the trade battle with China.

“China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a ‘match,’ it would be game over, we win! In any event, China wants a deal!” Trump wrote.

The Trump administration has been touting a stronger-than-expected GDP number for the first quarter as evidence that the US economy is booming. But the weak retail data released on Wednesday continue a negative trend seen in the first quarter, numbers for which were skewed by volatile export and inventory data.

Chinese state-run news outlets have also been talking up the resilience of the economy, notably in a China Central Television commentary this week which went viral.

China’s economy is “a sea, not a small pond,” the anchor said. A rainstorm he assured, “cannot harm the sea.”

A clip of the segment, which aired on CCTV’s evening news broadcast on Monday, became the most popular trending topic on Weibo, China’s equivalent of Twitter, according to SupChina.

Nonetheless, China’s economy appears to have weakened even before the increase in tariffs took effect. Industrial output for the country grew at a pace of 5.4%, year-over-year, missing analyst estimates.

Retail sales, meanwhile, grew at a rate of 7.2%, the slowest pace in nearly 16 years.

Analysts noted that the disappointing data bolsters the case for Beijing to ease monetary policy.

Leave a comment