Trump-Kim Two May Drive Nuclear Deal But China’s $3 Billion Trade May Matter More — Panjiva
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Trump-Kim Two May Drive Nuclear Deal But China’s $3 Billion Trade May Matter More

China 1758 North Korea 36 Sanctions 74 U.S. 3297

President Donald Trump has indicated that a second summit meeting will be held with Chairman Kim Jong-un to continue attempts to normalize relations between North Korea and the rest of the world. That may move to the provision of incentives such as the removal of sanctions against North Korea as part of a broad “nuclear deal”. Such a deal could provide a framework for a revised JCPOA deal with Iran, which the Trump administration has previously withdrawn from, as outlined in Panjiva research of June 12.

That comes as North Korea appears to be continuing its attempts to evade existing sanctions. The latest example is in the oil industry where the U.S. and others have had to implement marine surveillance and interdiction to prevent illicit transfers, S&P Global Platts reports.

In the meantime the principal economic pressure on North Korea comes from China’s limitation of trade within the framework of United Nations’ mandated sanctions. Panjiva analysis of official data shows China’s trade with the DPRK continues to be at well below historic levels with a 59.2% drop in August on a year earlier in total trade including a 91.9% slump in imports from North Korea. That brought total trade to $2.97 billion in the past 12 months to August 31 vs. $5.44 billion in 2015.

Yet, there has been a modest increase more recently including an 11.5% sequential increase in exports in the three months to August 31. That may indicate an increase particularly in food shipments – though no transparency is currently available – among other products as a “reward” for engagement so far.

CHINA HOLDING THE LINE ON NORTH KOREAN IMPORT SANCTIONS

Chart segments Chinese trade with North Korea by direction on a monthly (dotted) and quarterly average (solid) basis. Calculations include China General Customs Administration data.   Source: Panjiva

From a balance of payments perspective it isn’t clear, however, how the $1.90 billion merchandise trade surplus held by China vs. North Korea in the past 12 months is being financed.

WIDENING DEFICIT NEEDS FINANCING, SOMEHOW

Chart shows Chinese merchandise trade balance (exports less imports) on a monthly (bars) and annual average (line) basis. Calculations include China General Customs Administration data.   Source: Panjiva

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