Beijing
—
For China, the record annual trade surplus of $1.2 trillion that authorities reported Wednesday is strong evidence of its economy’s resilience in the face of U.S. trade tensions.
But this historical figure also tells a different story. It’s one possibility that China’s massive export engine could reshape the global economy and help China gain more leverage in its competition with the United States.
Whether that engine can keep running at its current speed, with a 20% surplus in 2025 compared to the previous year, is uncertain and will depend on the extent to which countries continue to erect trade barriers against Chinese goods.
But analysts say that even if growth in the surplus – a measure of how much more a country exports than it imports – slows in the coming year, China’s growing role as the world’s manufacturing superpower and the main driver of its massive global outflow of goods is unlikely to slow.
After US President Donald Trump launched a retaliatory tariff war with China early last year, the trading powerhouse has already shown its ability to adapt, with Chinese exporters rapidly pivoting away from US consumers and toward emerging markets in Southeast Asia, Africa and Latin America.
And this staggering surplus is a testament to the country’s rapid rise to dominance in green technologies such as electric vehicles, lithium-ion batteries and solar panels, as well as its ability to manufacture machinery and high-tech products at scale.
The influx of these products into markets around the world has been welcomed in some markets, where intense competition and weak demand, especially in China, mean companies need to export to survive, but it has caused serious friction with other markets, which say subsidized Chinese products are crushing domestic competition.
But from Beijing’s perspective, these trade trends are a source of great confidence for Chinese officials, especially in relation to the United States.
China’s trade resilience throughout the year defied expectations, despite a 19.5% decline in annual exports to the United States, its largest single export market for many years, and allowed Beijing to show it can survive reduced access to the world’s richest consumers.
This will reduce Beijing’s appetite for seeking major concessions as the U.S. and China continue to negotiate economic ties, including President Trump’s visit to China in April.
Tariffs on Chinese goods imposed on the United States last year now stand at 20%, down from triple-digit levels that were briefly raised last year as tensions escalated. And that can change at any time. President Trump said on Monday that countries doing business with Iran would face new 25% tariffs, and that China, a key economic lifeline for the Tehran regime, could be targeted again for higher tariffs.
But beyond the bilateral relationship, analysts say China’s rising status as a global manufacturer has broader implications for the United States, particularly in terms of its ability to disentangle strategic supply chains from China.
This is because the competitiveness of Chinese products is reducing the desire for production in other countries. While the Trump administration may aim to bring more manufacturing back to the United States, it will also look to other trusted partners. And as more of the economy becomes dependent on China, the U.S. has fewer options as it seeks to reduce its own dependence, experts say.
“If Germany, France, Japan and South Korea lose their industrial capacity, it will be even more difficult to create a supply chain that does not include Chinese parts,” said Victor Shi, director of the Center for 21st Century China at the University of California, San Diego.
“We’re moving towards that, and that may be the reality of the world for the next decade…As China’s control over various supply chains increases over time, (and the United States) may need to make further concessions.”
Many countries have already introduced their own protection measures.
Canada, along with the United States, has erected heavy barriers that effectively block Chinese electric vehicles from the market. Last month, Mexico approved new across-the-board tariffs on imports from a handful of countries, including China.
But the European Union moved earlier this week toward an alternative to existing tariffs on Chinese-made EVs by setting conditions under which China-based EV makers could commit to selling them at the lowest prices in Europe.
And analysts say countries including small and medium-sized developing markets may be more cautious about provoking China, even to protect their own manufacturing growth, especially if they are battling the U.S. trade war.
“It’s very difficult to deal with the problems of exports to the United States and at the same time deal with the problems with imports from China,” said Jacob Gunter, director of economics and industry programs at the Berlin think tank MERICS. He studies how countries are responding to the problem of China’s overcapacity hurting domestic industries.
“Everyone is absolutely terrified of the rare earths and other export restrictions that China has demonstrated the ability to exercise. Until we develop those alternative sources, it will be very difficult to have a trade war with China,” he added.
China has defended its trade practices and pushed back against the idea that it is flooding global markets with artificially cheap products and excess production, often referred to as “industrial overcapacity.”
An AI cartoon published by Chinese state media outlet Xinhua News Agency last month accused critics of double standards in a cartoon of a singing eagle, with lyrics that read: “When we lead China’s ‘great progress’, when China leads ‘overcapacity'”.
Other Chinese media and experts have hailed the trade surplus as a sign of the country’s deep commitment to globalization and its resilience in the face of Western pressure to “de-risk” supply chains from China.
However, within Japan, there is a deep awareness of the flip side of the economy’s dependence on exports: the persistent slump in domestic consumption demand.
This means that the strong export drive that has helped China maintain economic growth in the face of friction with the United States confirms that it is becoming more dependent on the global economy than Beijing would like.
And there are voices within China who speak frankly about the risks.
“The excessively high surplus shows that economic growth is dependent on external demand,” Southern Daily, the Communist Party’s official newspaper in Guangdong province, one of China’s major manufacturing powers, said in an editorial last month.
“Fluctuations in global market demand or changes in external conditions could pose potential risks to domestic economic stability,” it added.
