China’s surplus with the US has risen to a record while its overall export growth has slowed. With further large-scale US tariff measures, Chinese exporters will be hit hard and China’s GDP growth rate in 2019 is likely to be dented. If the US keeps ramping up its tariff measures against China, the export sector will face a long, hard road ahead despite government measures to mitigate the impact.

The US has threatened to impose higher tariffs on Chinese imports. While the immediate impact of the trade tension may be limited, the effect on economic confidence may be larger. Chinese exporters are feeling the pain as trade tensions between the world’s two biggest economies worsen.

China has announced measures to support some exporters targeted by the barrage of higher duties. Export rebate rates will be raised for 397 goods, ranging from lubricants to children’s books, meaning that firms shipping such products abroad will pay less value-added tax.

Export growth could decelerate to five to ten per cent over the next few months, then slowing more next year on high base, trade tension and a broad slowdown of the global economy. In the event of an all-out trade war, China could be hit harder by a change in market sentiment than a direct impact from tariffs.