China's Trade Surplus Surpasses $1 Trillion Milestone for the First Time

China’s trade surplus has set a new record, exceeding the $1 trillion mark in the first 11 months of the year. Data indicates that manufacturers are actively diverting exports to Europe, Australia, and Southeast Asia to circumvent U.S. tariff barriers.

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China's trade surplus has crossed the $1 trillion threshold for the first time in history, a milestone reflecting a strategic shift by the country's manufacturers to evade tariffs under President Donald Trump. In November, while shipments to non-U.S. markets surged, exports to the United States recorded a severe decline, falling by nearly a third compared to the same period last year.

The drop in exports to the U.S. occurred despite reports that the world's two largest economies agreed to scale back certain tariffs and other measures following a meeting between Mr. Trump and Chinese President Xi Jinping in South Korea on October 30.

Commenting on the trade landscape, Zichun Huang, China Economist at Capital Economics, said: “The tariff cuts agreed under the U.S.-China trade truce didn't help to lift shipments to the U.S. last month, but overall export growth rebounded nonetheless. We expect China's exports will remain resilient, with the country continuing to gain global market share next year.”

Huang added: “The role of trade rerouting in offsetting the drag from U.S. tariffs still appears to be increasing.”

The Numbers Speak Volumes

Customs data released on Monday showed that China's total exports rose 5.9% year-on-year in November, reversing a 1.1% decline in October and beating the 3.8% forecast in a Reuters poll. Imports also rose 1.9%, compared with a slight 1.0% increase in October.

The trade surplus in November reached $111.68 billion, the highest level since June and a sharp increase from the $90.07 billion recorded the previous month. For the first 11 months combined, the trade surplus has exceeded the $1 trillion threshold for the first time.

Market Diversification Strategy

China has stepped up efforts to diversify export markets since Mr. Trump won the election in November 2024, pursuing closer trade ties with Southeast Asia and the European Union (EU). At the same time, Chinese enterprises are leveraging their global footprint to establish new manufacturing hubs to benefit from lower tariffs.

Market divergence was stark in November:

• Exports to the United States: Down 29% year-on-year.

• Exports to the EU: Up 14.8%.

• Exports to Australia: Surged 35.8%.

• Exports to Southeast Asia: Up 8.2%.

Currently, the average U.S. tariff on Chinese goods stands at 47.5%, well above the 40% threshold that economists say would erode the profit margins of Chinese exporters.

Dan Wang, Head of China Practice at Eurasia Group, commented on export drivers: “Electronic machinery and semiconductors seem to be key (to higher exports). There is a shortage in lower-grade chips and other electronics, which meant prices jumped, and Chinese companies going global have been importing all kinds of machinery and other inputs from China.”

Policy Outlook and Domestic Demand

The Chinese Yuan strengthened on Monday on better-than-expected export data. Investors are now awaiting policy signals from key year-end meetings, particularly the upcoming Central Economic Work Conference.

China's Politburo on Monday pledged to take steps to expand domestic demand, a shift analysts say is critical to reducing the $19 trillion economy's reliance on exports.

In terms of commodities, China's rare earth exports rose 26.5% month-on-month in November. Soybean imports are also on track for their best year ever. However, imports of unwrought copper declined, reflecting persistent weakness in domestic demand due to the protracted property market downturn.

Concluding on the challenge of rebalancing the economy, Lynn Song, Chief Economist for Greater China at ING, said: “China's pivot to establishing domestic demand as a key driver of growth will take time, but it’s essential for China to move into the next phase in its economic development.”

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