Influx of cheap Chinese imports could drive down UK inflation, economists say

"After figures showed China's trade surplus surpassed $1tn (750bn) despite Washington's tariff policies hitting exports to the US, the Bank of England said the UK was among the nations emerging as alternative destinations for the goods. Stephen Millard, a deputy director at the National Institute of Economic and Social Research, said: There is an expectation that given the high tariffs the US are imposing on China, that China will divert its trade elsewhere and one of those places will be the UK."

"This month Catherine Mann, an external member of the Bank's rate setting monetary policy committee, told MPs on the Treasury committee there were early signs of trade diversion affecting UK inflation. Import prices have started to moderate on the back of sterling appreciation and some of the spillover of the diversion of Chinese products from the US tariff burdens to other places, including to our docks. Not a lot. Actually less than I would've thought. But it's there."

"Official figures released by Beijing this month show China's trade surplus reached more than $1tn in the year to November for the first time, as manufacturers shipped more to non-US markets to sidestep Trump's tariffs. While exports to the US plummeted by 29% year-on-year, sales to markets elsewhere ballooned, including a 15% rise in exports to the EU and 9% jump to the UK compared with the same period a year earlier."

China's trade surplus exceeded $1tn in the year to November as manufacturers shifted shipments to non‑US markets to sidestep US tariffs. Exports to the US fell 29% year‑on‑year while exports rose 15% to the EU and 9% to the UK. The Bank of England identifies the UK among alternative destinations absorbing diverted Chinese goods. Economists say the influx of cheaper Chinese imports is moderating UK import prices, aided by sterling appreciation, and producing a modest disinflationary effect. Early evidence suggests tariffs have had a limited impact on global growth. UK headline inflation stands at 3.2%, forecast to fall close to 2%.

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