China’s July Exports Beat Forecasts Despite Tariff Retaliation and AI Demand Surge

July's export figures reveal a robust exporting China that, despite international economic uncertainties, maintained its momentum. In nominal terms, Chinese exports to the rest of the world surged 23% in July, surpassing initial expectations of about 22%. However, this growth decelerated slightly compared to June’s pace of around 27%, the fastest since October 2021. Imports increased by 27.5% on a similar basis, slightly below forecast and down from June's robust jump of roughly 36%, the quickest in five years. The trade surplus came in at about US$112 billion, above forecasts of around US$107 billion but lower than the US$126 billion recorded in June. Global demand for artificial intelligence (AI)-related products helped boost export growth even as domestic consumption remained subdued. Chinese exporters also appear to have front-loaded shipments to the U.S. ahead of a new 12.5% tariff that replaced a temporary lower rate in late July. Additionally, China restricted drone exports this week in response to recent US actions. This series of events adds another layer of uncertainty to the commercial landscape, especially as bilateral discussions are being considered.