How China racked up a US$1 trillion trade surplus

Beijing shakes off damage caused by Trump's trade warAuthor of the article:You can save this article by registering for free here. Or sign-in if you have an account.In a year dominated by United States President Donald Trump’s tariff war, a blizzard of tit-for-tat levies and stop-start trade negotiations, China’s US$1 trillion surplus has made clear that it remains an unstoppable trade juggernaut.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.While the country’s trade surplus with the U.S. is more than US$100 billion lower so far this year compared with last year’s total, it has increased in a host of other destinations from south-east Asia to Europe. The result is a historic global goods surplus that reached US$1.08 trillion in November, driven by US$3.41 trillion of exports and surpassing every previous full-year total.This week in Beijing, IMF managing director Kristalina Georgieva warned of China’s trade relation “imbalances”, which days earlier French President Emmanuel Macron said were becoming “unbearable”.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.The trade differential also reflects China’s march up the manufacturing value chain, particularly in automobiles, adding to its long-standing dominance in areas such as phones and computers as well as lower-value goods.“In the near term, I think the trade surplus will still continue to grow,” said Michelle Lam, greater China economist at Société Générale. “It’s a problem that’s not going to go away any time soon.”But China’s export strength belies a weaker economic picture at home, where policymakers are grappling with muted consumer confidence and deflation. Imports have also declined, straining relations with trading partners and raising the prospect of retaliation.China’s export growth to south-east Asia is among the most striking features of the emerging trade order — and one that is being closely scrutinized for its relationship to Trump’s tariff war.China’s surplus with the region was US$245 billion for the first 11 months of the year, well above the US$191 billion figure over the full year for 2024. That was driven by growth in the surplus with countries such as Vietnam and Thailand, as well as Malaysia, with which China ran a deficit last year.Economists say that was likely to reflect Chinese goods being “transshipped” through the region, whose own exports to the U.S. have soared this year.Regional data shows China’s push into a host of other markets this year. The country’s 11-month surplus with Africa is up US$27 billion over the full-year 2024 figures, driven by Nigeria, Liberia and Egypt and sales of cargo ships to the continent. China’s surplus with the European Union is up nearly US$20 billion, while for Latin America it has risen US$9 billion.The single largest increase to the trade surplus this year came from autos. China’s surplus for the sector was up US$22 billion in the first 10 months of 2025 compared with the same period last year, taking its total to US$66 billion.That is an extraordinary turnaround from just three years ago, when China had a deficit with the rest of the world in autos. China only overtook Japan as the world’s biggest auto exporter in 2023.The country’s auto trade with the EU also shifted from a deficit to a surplus this year, while exports of cars boosted its surplus with Africa.China also had a US$64 billion global trade surplus in batteries over the first 10 months, reflecting a nationwide push into electric vehicles that has turned the country’s leading EV makers such as BYD into global household names.China’s vast manufacturing sector remains a critical base for multinationals from Apple to Volkswagen, as well as domestic producers.In the first 10 months of 2025, US$837 billion of China’s exports, or more than a quarter of the total, came from foreign-invested companies, customs data shows.Two of the biggest contributors to the country’s trade surplus over the period were phones and telecommunications products, at US$151 billion, and computers, which accounted for a further US$70 billion.China’s surplus has also been driven by a host of small-ticket items including a surge in low-value packages — the business model employed by online retailers such as Shein and Temu, which have come under fire in the U.S. and EU for taking advantage of duty-free loopholes.Low-value packages added US$22 billion in trade surplus in the first 10 months compared with the same period last year, with a sharp increase to Europe.The renminbi has appreciated against the dollar over the past year, but the Chinese currency remains at a weaker level compared with the past decade.In contrast to other major economies, China is grappling with consumer and producer price deflation at home related to the high rates of production that are feeding the export boom.Adam Wolfe, an economist at Absolute Strategy Research, said China’s share of global export volumes was rising at a rate not seen since the initial “China shock” in the 2000s following the country’s accession to the World Trade Organization. But at the same time, the overall value of its exports had remained steady in nominal terms because prices had fallen.Economists said that deflationary pressure was making China’s producers more competitive against global rivals. “Every year, the inflation differential also gives China additional competitiveness in terms of pricing,” said Shuang Ding, chief economist for greater China and north Asia at Standard Chartered.While China’s exports have grown this year, imports have edged down in dollar terms to US$2.3 trillion. China’s biggest source of individual imports is commodities, such as iron ore, copper, soybeans and petrochemicals. It is also a major importer of semiconductors, a focal point of U.S. trade pressure.Ding said there were some “signs of import substitution”, meaning products that China previously imported, such as machinery and industrial robots, were now being made domestically.But China is also grappling with slack domestic demand and a property sector downturn now entering its fifth year. A host of recent indicators, such as falling investment, underscore the importance of exports in driving economic growth.Wolfe forecast the trade surplus could continue to climb towards US$1.5 trillion if fixed-asset investment remained weak, especially in construction, which is more reliant on commodities and helps boost imports.“The New China Shock will persist as long as domestic demand remains weak,” he said.© 2025 The Financial Times LtdPostmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. 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