The full extent of the impact on Chinese exports from the ongoing U.S.-China trade war is now becoming clear.

China’s export growth in greenback terms fell 3.2% year-on-year in September, according to customs data released Oct. 14., after also declining 1% compared to a year earlier in August.

Last month’s drop in China’s export growth was largely attributable to the mammoth decline in shipments to the U.S., which fell 21.9% year-over-year, and also receded from the 16.0% drop recorded in August.

This resulted in average Chinese export growth to the U.S. of negative 15.1% in Q3, a decline from negative 8.2% in Q2.

“After adjusting for Lunar New Year distortions, September export growth [to the U.S.] was the lowest single-month reading since January 1996, when the data series was first released by China customs,” noted Japanese financial services group Nomura.

“The big contraction in the growth of U.S.-bound exports was mainly due to existing higher U.S. tariffs on the $380 [billion U.S. tariff] list and an unfavorable base in September 2018, as Chinese exporters rushed to frontload their shipments to the U.S. ahead of scheduled tariff hikes on the $200 billion (tariff) list.”

Illustrating that there have been no winners in this trade war, although President Trump called for the repatriation of manufacturing from China, many producers are instead opting for low-cost options elsewhere in Asia to maintain profit levels.

China’s imports from the U.S. are also sluggish. Last month imports contracted 15.7% year-over-year after also dropping 22.3% in August, taking the quarterly average growth to minus 19.1% year-over-year in Q3 from minus 27.9% in Q2.

“As a result, China’s trade surplus with the U.S. narrowed to $25.9 billion in September from $27.0 billion in August,” said Nomura.

Nomura noted that China’s total export growth was 9.9% in 2018 and negative 0.1% in January-September 2019. This sudden slowdown of export growth “should bring down China’s gross domestic product by around 1.3 percentage point over January-September this year,” it concluded.

China’s export growth is expected to further slow in the coming months despite the current trade truce. “The truce between U.S. and China might boost sentiment, but we maintain our view that the worst is yet to come,” said the Nomura report.

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