BEIJING -- For the first time in more than two years, China's exports and imports both fell year on year in December, according to data released Monday, reflecting the drop in trade with the U.S., as well as shrinking domestic consumption.
The weaker-than-expected showing, which Goldman Sachs called "well below consensus expectations," was best represented in the sluggish exports of cellphones, which plummeted 31%. The decline in trade is likely to cloud China's economy as a whole, which has been underpinned by firm exports since 2017.
Meanwhile, auto sales in China, the world's largest market, declined for the first time in nearly three decades in 2018, in data released Monday as uncertainty over trade dampened consumer sentiment and further shackled economic growth.
Overall, December exports fell 4.4% on the year to $221.2 billion, while imports shrunk 7.6% to $164.1 billion. Trade with the U.S. was especially slow, with exports falling 4% to $40.2 billion and imports nose-diving 36% to $10.4 billion.
The trend complicates the options for U.S.-China trade negotiators, who are seeking ways to reduce the trade imbalance between the two nations. China's trade surplus with the U.S. for the full year jumped 17% to a record of $323.3 billion, as exports to the U.S. climbed 11% to $478.4 billion while imports edged up just 1% to $155 billion.
U.S. President Donald Trump predicted on Monday that a trade deal with China was likely.
"We're doing very well with China. They're having a hard time with their economy because of the tariffs," Trump told reporters at the White House. "I think that we are going to be able to do a deal with China. China wants to negotiate."
Looking deeper into China's December trade statistics, exports for the labor-intensive fields of clothing and textiles, which are in a tough competition with Southeast Asian countries, fell on the year, as the additional duty of 10% imposed by the U.S. from September took a toll. Furniture exports rose just 2%.
On the import side, semiconductors dropped the most by value, sliding 15% for their second straight month of year on year decreases as cellphone and computer assembly declined. Auto imports also plummeted 30% thanks to poor domestic sales.
Chinese imports from the U.S. have retreated on the year for four consecutive months, and December's reduction was the largest among available statistics dating back to January 1993. Retaliatory tariffs on U.S. soybeans and liquefied natural gas -- goods easily procured from other regions -- have prompted Chinese buyers to switch their suppliers. State-owned companies, which account for a large portion of Chinese imports, are also staying away from U.S. products.
Exports to the U.S. have also fallen for the first time in nine months. The figures suggest that American buyers had frontloaded imports of items that were not subject to additional tariffs as Trump threatened to impose extra duties on all Chinese products.
"Last-minute demand [before the tariffs kicked in] has passed, and the downturn seems to have begun," said Nomura Securities.
Foreign demand accounted for 2 percentage points of the country's 6.8% real growth in gross domestic product for the October-December quarter of 2017. A downturn in exports will likely weaken the country's economic growth.
The largest beneficiaries from exports are private companies, which employ 80% of China's workforce. A deterioration in trade could hurt these businesses, further affecting the country's job market.
Chinese President Xi Jinping has moved to expand imports from early 2018 to ease trade tensions with the U.S., but poor domestic consumption has hindered his efforts. Retail sales in November recorded the slowest growth in 15 years. Construction on infrastructure projects meant to stimulate the economy has not started, and real estate investment is lackluster.
Most symbolically, Chinese sales of new autos declined on an annual basis for the first time in 28 years.
A total of 28.08 million new vehicles were sold in 2018, down 2.8% from the previous year, according to data released Monday by the China Association of Automobile Manufacturers. Sales of passenger vehicles, which compose more than 80% of the market, slid 4.1% to 23.71 million.
"In addition to the tax break on auto purchases expiring at the end of 2017, the economic slowdown and the U.S.-China trade war also affected consumer sentiment," a senior official at the industry group told reporters. Sales this year are projected to be on par with 2018.
The automotive industry has become China's largest industrial sector, reportedly generating about 10% of gross domestic product when maintenance and other services are included. Continued weakness risks further weighing on an already faltering economy, and the Chinese government is considering steps to promote car-buying in rural areas to at least keep sales from declining again this year.
Non-Chinese automakers put in mixed performances. Toyota Motor's Lexus luxury brand, which is imported from Japan and elsewhere, enjoyed a 14% rise in sales thanks to a midyear tariff cut. Brisk demand for sport utility vehicles fueled a 20% jump at Zhejiang Geely Holding Group, owner of Sweden's Volvo Cars.
By contrast, American automakers struggled under retaliatory duties imposed by China in July, with General Motors and Ford Motor seeing declines of 10% and 37%.
Overall, the year 2018 was a year that investors in China "would wish to forget," wrote New York-based investment bank Jefferies. "Not one single investment factor delivered absolute returns," it noted in a strategy note.