Even as markets trade optimistic in the hopes for a resolution to the US-China trade war, China’s exports continue to suffer on account of the tariff hikes imposed by the US. According to a Chinese customs spokesman, China’s exports to the US declined by 10.7% YoY till September this year.

Meanwhile, China’s imports from the US also fell by 26.4% during the same period over escalating trade tensions between the world’s largest economies. Overall, China’s exports shrank at a faster than expected pace during September, marking the fifth consecutive month of contraction in exports. According to customs data, exports from China declined by 3.2% YoY in September vs. 3.0% expected and 1.0% in the previous month. This was the steepest decline in exports since February.

China’s imports also declined by 8.5% in September, a sharper decline than the 5.6% seen in August and far higher than the 5.2% decline forecast by economists for the month. These figures reveal that trade in China has been impacted severely by the tariff hikes and the trade war, even as domestic demand also weakens, putting additional pressure on the Chinese economy. Economic uncertainty and weakening business confidence have been weighing heavily on Chinese markets, bringing down both exports as well as imports.

On the positive side for China, trade surplus surged to $39.65 billion in September from $34.84 billion in August, coming in higher than economists’ expectations for a slight decline to $33.3 billion instead. On the release of this news, USD/CNH trades mostly unaffected at around 7.056 as markets focus on the Phase 1 trade deal announcement from the previous week instead.