A cargo ship loaded with foreign trade containers heads towards Qingdao Port in Qingdao City, Shandong Province, China, on November 5, 2025.

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China’s exports in October declined for the first time in nearly two years due to a high base effect and as businesses’ front-loading momentum tapered off and trade tensions with the U.S. escalated before the two countries reached a deal.

Outbound shipments dropped 1.1% in October in U.S. dollar terms from a year earlier — their first contraction since March 2024, when exports shrank by a staggering 7.5%.

Exports decline was unexpected with economists anticipating a 3% growth, according to a Reuters survey, and compared with a six-month high growth of 8.3% in September.

Imports rose 1% last month, missing the estimates for 3.2% growth, as a prolonged housing market downturn and weak job market conditions continued to weigh on consumer demand. They had jumped 7.4% in September.

Chinese exporters and American buyers breathed a sigh of relief last week after U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, struck a deal during their meeting in South Korea, de-escalating a situation that had threatened to plunge bilateral relations into a full-blown trade war.

The two countries agreed to roll back a range of punitive measures, including steep tariffs, export controls for critical minerals and advanced technology, while Beijing committed to buying more U.S. soybeans and working with Washington to crack down on fentanyl flows.

Following the trade truce, the effective U.S. tariff rate on Chinese exports dropped to 31%, according to Macquarie Group’s estimates.

The sharp slowdown last month was in part due to the high base in October 2024, when exports grew at their fastest pace in more than two years.

China has racked up a trade surplus of over $964.8 billion in the first 10 months of this year, 23% higher than that during the same period of 2024.

Oxford Economics raised its forecast for Chinese exports to grow at 3.5% to 5% annually in real terms, according to a report on Thursday, buoyed by Beijing’s push to deepen industrialization in its next five-year development plan and Chinese exporters’ efforts to diversify into regional and emerging markets.

The research firm improved its forecast for China’s real GDP growth to 4.5% for 2026 and 4.4% for 2027.

“As long as exports remain strong, policymakers don’t need to boost consumption; if exports were to plunge, they would have to turn to domestic consumption to achieve the annual GDP target,” said Larry Hu, chief China economist at Macquarie Group, who anticipates Beijing will have to turn to domestic demand as the main growth driver “at some point between 2026 and 2030.”

Hu expects Beijing to set a growth target of “around 5%” again in 2026 and will calibrate stimulus to neither miss nor over-achieve that goal.

The country, however, is seeing a decline in manufacturing.

Falling prices and cutthroat price competition has prompted Beijing to step up efforts to rein in industrial overcapacity in recent months. Profits at the major industrial firms rose 3.2% in the first nine months.

Economic data for October suggested that manufacturing activity had contracted for seven consecutive months, as trade tensions with Washington had reignited.