In 2024, nearly 160 countries worldwide had a GDP of less than USD 1 trillion. In the first 11 months of 2025, China’s trade surplus exceeded USD 1 trillion, marking the first time a country’s trade surplus has reached this milestone.
What’s even more impressive is that China achieved this historic milestone despite a trade war with the US, its most important export market, and the tariffs imposed by US President Donald Trump.
It’s safe to say that Trump’s tariffs have failed to reverse the course of the world economy and China’s export-oriented role in it.
At best, Trump’s tariffs have altered the flow of goods, with Beijing exporting more to ASEAN and European countries, and many goods taking a cyclical route from China to the US via third countries rather than moving directly between them.
Regardless, the USD 1 trillion trade surplus is historic, as last year there were only 19 countries with a GDP of more than USD 1 trillion.
The world is in awe and fear. However, notwithstanding this historical achievement, experts are unanimous that China’s USD 1 trillion trade surplus is not good news, neither for the world nor for China.
China’s Export Story: From USD 10 Billion To USD 1 Trillion In Three Decades
China is widely recognized as the world’s factory. However, this was not always so.
Ironically, it was none other than the US that paved the way for the dragon’s rise in the global export market.
In the late 1970s, the US reached a historic detente with China to undermine the Soviet Union, Washington’s primary adversary during the Cold War.
In the next decade, the US helped China’s industrial growth.
The US transferred technology and capital to China in the 1980s, aiding the early growth of its factories.
In the next two decades, millions of low-paying manufacturing jobs shifted from the US to China. Many factors contributed to this shift: manufacturing jobs were low-paying, and the US was shifting toward high-skill, high-paying service and financial-sector jobs.
Additionally, stringent environmental protection laws in the West led factories to relocate from the West to China.
Due to these slow but incremental changes, by the mid-1990s, China began registering a modest trade surplus for the first time in decades.
In 1995, China registered a trade surplus of USD 11.96 billion. By 2005, this trade surplus jumped nearly tenfold to USD 124.6 billion. In 2015, it jumped to USD 358.8 billion.
By 2025, it jumped nearly threefold again, crossing the historic USD 1 trillion mark.
The US contributed to a good part of this trade surplus.
For instance, in 1995, the US was running a trade deficit of USD 33.78 billion with China.
By 2005, the US trade deficit with China reached USD 202.27 billion. In 2015, the figure was USD 367.32 billion in China’s favour. It touched a high of USD 418 billion in China’s favour in 2018.
Since then, it has been hovering around USD 300-350 billion. In the first nine months of 2025, the US trade deficit with China was USD 160 billion, a modest decline.
However, the question is: if the US is China’s most important export market and China’s exports to the US are declining, how is Beijing still expanding its trade surplus?
The answer is that China is diversifying its trade partners. High tariffs on exports to the US have been offset by a surge in exports to other countries, primarily in the EU and ASEAN.
For instance, Chinese shipments to the United States dropped 29% year-on-year in November, while exports to the European Union grew by 14.8% year-on-year. Shipments to Australia surged 35.8%, and the fast-growing Southeast Asian economies took in 8.2% more goods over the same period.
The burgeoning trade surplus dramatically illustrates China’s export prowess. However, experts warn that this high trade surplus is a sign not only for the world but also for Beijing.
Why China’s $1 Trillion Trade Surplus Is A Bad Omen For Everyone
There are many reasons for China’s massive trade surplus, beyond the quality and price competitiveness of its products.
Industries in China often get massive state subsidies. Frequently, the Chinese state provides these subsidies solely to kill competition in other countries.
Unable to meet the artificially suppressed low prices of Chinese products, one by one, foreign companies go bankrupt.
A case in point is how China destroyed foreign competition in the strategically important sector of rare-earth mining and processing, leaving Beijing with a monopoly.
China is playing the same trick in the critical fields of Electric Vehicles, batteries, and solar panels.
Another factor is China’s manipulation of the Yuan exchange rates. Beijing keeps the Yuan exchange rates artificially low to make its products more price-competitive in global markets.
It is mind-boggling how, despite running this massive trade surplus, the Yuan is not rising.
Writing in the Financial Times, Eswar Prasad said: “China’s growth model is becoming increasingly difficult to sustain. Post-COVID, the old playbook of credit-fuelled investment has sustained GDP growth despite a shrinking labour force and anaemic productivity. Weak growth in employment and wages, in tandem with falling property prices and lack of confidence in the government, have curtailed consumption. The resulting imbalance between factory output and domestic consumption leaves exports as the only option.”
China is now flooding ASEAN markets with its products, which could lead to deindustrialization in these countries, as trade with China did in the US in the 1980s and 1990s.
However, this trade surplus is not a good sign for China either. It underlines how China’s economic model and growth are totally dependent on exports.
If ASEAN and the EU countries also adopt protectionist policies like Trump, China’s growth story will go bust.
In fact, the size of the surplus is already causing anxiety around the world. “The imbalances we see accumulating today are not sustainable,” said French President Emmanuel Macron on a visit to Beijing this month.
Macron also said he had threatened China’s President, Xi Jinping, with tariffs if no action was taken to reduce the trade deficit with the EU.
Furthermore, a recent report by Goldman Sachs on China’s export muscle was titled “Beggar thy neighbour.” And, the International Monetary Fund (IMF) has called on China to fix its imbalances.
Additionally, if another 2008-like financial crisis hits the world, impacting global demand, China’s exports and its growth story would derail.
China has become dependent on foreign spending to stabilise its own economy. However, if the trade war spreads to Europe and ASEAN, or if there is another global financial meltdown, China’s economy could collapse like a house of cards.
China’s Communist Party is aware of the dangers.
President Xi chaired a meeting of the Chinese Communist Party’s ruling Politburo on Monday. According to a readout in state media, the cadres discussed the need to “continuously expand domestic demand” and to make consumption the “main driver” of the economy.
However, for now, these efforts are too little and too late. They are grossly insufficient to wean a USD 19 trillion economy away from exports.
