In a world where bigger often means better, China’s trade surplus is certainly not playing small. The world’s second-largest economy is closing in on a $1T trade milestone this year, with a $785B trade surplus in just the first ten months of 2024. This growth, driven by strong exports despite weak domestic demand, has been further fueled by Beijing’s recent stimulus measures. However, Trump’s re-entry to the presidency brings the looming threat of high US tariffs, which could prompt retaliatory measures from China and potentially ignite a trade war.****

• China’s surplus with key trading partners has ballooned significantly, with the US, EU, and ASEAN nations up 4.4%, 9.6%, and 36%, respectively.
• Despite holding a trade surplus with 170 countries, President-elect Trump’s proposal to raise tariffs by up to 60% on Chinese imports could slow the flow of exports to the US.

International trouble: South American and European nations have already imposed higher tariffs on Chinese products like steel and electric vehicles. Meanwhile, foreign direct investment is on track for its first net outflow from China since 1990. To add to the tension, India’s central bank has signaled it may let the rupee weaken if China devalues the yuan, setting the stage for a potential currency war that could further destabilize global trade relations.

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