Resilience and Friction: How China’s Record Trade Surplus is Testing Global Supply Chains

In the first 11 months of 2025, China's trade surplus surpassed $1 trillion for the first time ever, reaching $1.076 trillion (exports $3.41 trillion and imports $2.34 trillion) and exceeding the total surplus for the entire year of 2024. This, of course, has attracted significant global attention. CNN stated the $1.076 trillion trade surplus set a new record for the same period in history, providing crucial support for China's economic growth. Germany's Handelsblatt commented that China has demonstrated remarkable resilience in the complex international trade environment, with exports remaining a key engine for China's economic growth. Morgan Stanley economists predict that, leveraging technological advantages in areas such as electric vehicles, industrial robots, and energy storage batteries, China's share of global merchandise exports will increase from the current approximately 15% to 16.5% by 2030.

In the first 11 months, integrated circuit exports amounted to 1.29 trillion yuan, surging by 25.6%; automobile exports totaled 896.91 billion yuan, up 17.6%, and ship exports reached 362.51 billion yuan, an increasing 27.8% year-on-year. From the perspective of export products, China's export mix reflects a substantive structural transformation. High-value-added products, particularly in new energy and electronics, are building a formidable competitive edge.

During the same period, exports of labor-intensive products fell by 3.5% year-on-year. Since the second half of 2024, the U.S.’s "reciprocal tariffs" have done more to erode  them as competitors instead of hoisting them up.  This has led to the transfer of labor-intensive products,such as garments and clothing accessories, lower-cost regions in Southeast Asia, such as Vietnam, Bangladesh, Cambodia, and Myanmar.

China's exports rebound despite drop in U.S. shipments

Since Trump's return to the White House, China has intensified efforts to develop diversified export markets, actively strengthening trade ties with Southeast Asia and the European Union. Furthermore, China has been leveraging the global presence of its companies to establish new production hubs in order to secure more favorable tariff treatment. According to data from China Customs, in the first 11 months of 2025, the United States ranked as China's third-largest trading partner. During this period, China's exports to ASEAN reached $599.034 billion, a year-on-year increase of 13.7%; exports to the European Union totaled $508.048 billion, up 8.1%; while exports to the United States amounted to $385.907 billion, a decrease of 18.9% compared to the same period last year. Notably, exports to the U.S. plummeted by 29% in November alone, marking the eighth consecutive month of decline.

A one-year US-China trade truce was reached in October, involving mutual agreements to roll back steep tariffs and ease some export controls.  However, its impact was not yet evident in China’s November trade figures and is expected to materialize gradually in the coming months.  China’s Manufacturing PMI, a key gauge of factory activity, registered 49.2% in November, a slight increase of 0.2% from October. Nevertheless, it has remained below the 50-point expansion threshold for eight consecutive months, reflecting continued weak domestic demand and fragile economic momentum.

The decline in direct exports to the U.S. does not capture the whole picture. In Fact, China has deeply participated in and influenced the North American and global markets by embedding its supply chain in regions such as ASEAN and Mexico. As highlighted in McKinsey’s 2025 report on geopolitics and global trade, ASEAN has been a primary beneficiary of the U.S. trade shift away from China, with Vietnam gaining the most in sectors where China lost share. For instance, China was the dominant source of Vietnam’s electronics imports in 2024-2025, accounting for $58.62 billion (43.1%)—a range that spans components to finished goods such as computers and mobile phones. This suggests that a substantial share of the value of Vietnam’s subsequent exports to the U.S. is of Chinese origin. Similar patterns are observable in chemicals, machinery, and textiles, where the growth of ASEAN exports to the U.S. is often underpinned by Chinese industrial chains. The reported one-third increase in U.S. imports from Indonesia in the first eight months of 2025 was widely attributed to rerouted Chinese goods.

Besides ASEAN, Mexico is also a crucial transit point for Chinese goods entering the North American market, particularly for avoiding tariffs under the United States-Mexico-Canada Agreement (USMCA) by meeting rules of origin. Mexican officials have emphasized that U.S. companies in Mexico account for a substantial portion of Mexico’s imports from China and East Asia. Analysis of data from the Asian Development Bank finds that value-added content from China accounts for roughly 7 percent of the value of Mexico’s goods exports to the U.S.

 On December 10, the Mexican Senate approved tariffs of up to 50% on imports from countries without trade deals with Mexico, including China and other Asian countries, mainly targeting automobiles, auto parts, textiles, apparel, plastics, and steel, aiming to bolster local industry, reduce imports from China and curb the transshipment of Chinese goods to the U.S. via Mexico.  It is also seen to gain favorable terms for Mexico in the upcoming renegotiation of the USMCA. According to the proposal from Mexico’s Ministry of Economy, this measure will affect imports totaling $52 billion, representing about 8.6% of Mexico’s total imports, with the majority originating from China.

Canada, as a USMCA partner, is highly likely to emulate Mexico by imposing additional tariffs on Chinese goods. This would be a response to the threat posed by Trump’s proposed 25% tariffs and an effort to strengthen protection in sectors such as automobiles and steel. Meanwhile, The United States has been pushing countries in Latin America to limit their economic ties with China.

The Trillion-dollar Trade Surplus Raised Global Concerns

However, the trillion-dollar trade surplus has raised global concerns over trade imbalances. This imbalance is likely to incur more trade protection measures.

In the first 11 months of 2025, China's exports to the European Union increased by 8.1%, while imports decreased by 2.1%. The trade surplus reached 266.8 billion US dollars, a year-on-year increase of 19.6%.

Jens Eskelund, President of the European Union Chamber of Commerce in China, warned: "The whole world is going to have to pay for it in financial terms."

At the conference in Beijing on Dec 8, 2025, IMF Managing Director Kristalina Georgieva urged China to address its economic imbalances, warning that "China's continued dependence on export-led growth risks furthering global trade tensions."

In response to the continuously rising trade deficit between the European Union and China, the European Union is tightening its oversight of goods from China. For instance, the European Commission has announced a plan to phase out tariff exemptions for small packages by 2026 at the latest. The European Union has increased tariffs on Chinese-built electric vehicles to as much as 45.3% in Oct 2024. In Oct 2025, the European Commission plans to introduce import tariffs of 50 percent on steel from China as well as the U.S.

The ‘Trump Effect’ is sending ripples through the global trading system. Countries in Southeast Asia, such as Indonesia, Thailand, and India, have planned similar tariff measures to maintain a regional trade balance.

Several factors are fueling China's export surge to Europe: softening domestic consumption, industrial overcapacity, supportive subsidy policies, and a depreciating RMB. The RMB has fallen to record lows against the euro, exceeding 8.4 RMB per euro in recent months compared to 7.5 at the start of 2025. Trade experts argue that this depreciation is aiding a flood of Chinese exports, widening the European Union's trade deficit with China.

Looking ahead, trade diversification and complex geopolitical frictions will introduce greater uncertainties and complexity to global supply chains. For over two decades, CCA-IM has served as a reliable partner for North American companies, helping them navigate these complexities and build successful strategies in China and Asia. Learn more at www.cca-im.com.