China’s Export Surge Fuels Global Backlash Over Trade Imbalance: Analysts

China’s exports surged 25 percent in August, pushing its trade surplus above $800 billion in the first eight months of the year as weak domestic demand leaves Beijing increasingly reliant on overseas markets to absorb excess industrial capacity.

The widening imbalance is drawing growing scrutiny from the United States, Europe, and other major economies, raising the prospect that pressure on Beijing will shift beyond bilateral trade disputes toward its broader, state-led economic model.

China’s customs data showed that exports rose 25 percent year over year in August, while imports increased 28.2 percent. The monthly trade surplus reached $119.09 billion, bringing the cumulative surplus for the first eight months of the year to $805.51 billion.

The surge has continued despite U.S. tariffs on Chinese goods. Chinese exports to the United States rose 34.4 percent in August, suggesting that tariffs have not yet significantly reduced China’s overall export capacity.

However, economists and experts say the impact of tariffs may be showing up elsewhere.

“China’s exports have not been suppressed by tariffs, but are paying a higher cost to maintain their export scale,” Davy Jun Huang, a U.S.-based economist and former columnist for Chinese state media outlet CNTV, told The Epoch Times.

Rather than losing export capacity, Chinese companies are increasingly lengthening their supply chains, Huang said. Businesses have expanded into Southeast Asia, Latin America, and the Middle East, while some have established overseas factories or routed production through third countries.

Additional overseas production, transshipment and origin certification can increase logistics, compliance, and management costs. Emerging markets can also offer lower purchasing power and profit margins than the United States and Europe, Huang said.

Sun Kuo-hsiang, a professor of international affairs and business at Nanhua University in Taiwan, told The Epoch Times that tariffs are affecting the routes and structure of Chinese exports more than their overall volume.

In the longer term, he said, Chinese companies could accelerate overseas production, creating supply chains that appear “de-Chinafied” while still relying heavily on Chinese components.

From US-China Trade to a Global Problem

The growing Chinese surplus is increasingly being viewed as a global issue rather than simply a source of U.S.–China trade friction.

President Donald Trump has pressed Beijing to buy more U.S. agricultural products, energy, and manufactured goods to reduce the bilateral trade imbalance. However, Huang said the U.S. focus could increasingly shift from how much China buys to why China continues producing such large quantities of goods in the first place.

That could make the next stage of U.S.–China trade negotiations considerably more difficult.

China’s weak domestic consumption is often cited as an explanation for its enormous trade surplus. However, Huang said the imbalance also reflects the long-standing emphasis by the Chinese Communist Party (CCP) on manufacturing, export capacity, and strategic industries, while household income, social security, and consumer spending have received comparatively less attention.

For China to rely more heavily on domestic consumption to absorb excess production, Beijing would need to increase household incomes and strengthen social security, Huang said.

Such changes, however, would involve redistributing resources among the government, businesses, and households and could weaken the low-cost manufacturing model that has helped drive Chinese exports.

The issue was also prominent at a recent meeting of G20 finance ministers and central bank governors.

U.S. Treasury Secretary Scott Bessent said after the meeting on Sept. 1 that all 19 other G20 members supported addressing “non-market” policies and excessive reliance on exports that contribute to global trade imbalances. China opposed the language, preventing the group from issuing a joint communiqué. The United States instead issued a chair’s statement.

Bessent said U.S. tariffs had helped narrow the U.S.–China trade deficit but had not removed Chinese goods from global markets. Some of those goods, he said, have instead been redirected toward Europe, Southeast Asia, and Latin America.

European officials are also pressing Beijing over the widening imbalance.

EU Economy Commissioner Valdis Dombrovskis has said China is one of the major sources of global economic imbalances. China’s goods trade surplus with the European Union reached 360.6 billion euros ($419 billion) last year, up 15 percent from the previous year, and expanded another 9 percent in the first half of this year.

On Sept. 8, EU Trade Commissioner Maros Sefcovic said the European Commission would formally ask China to commit to addressing the growing trade imbalance and expects Beijing to present an initial action plan by early October.

Huang said the U.S. view is increasingly shifting from China as a country responsible for America’s trade deficit to China as a country whose excess industrial capacity is affecting markets worldwide.

As a result, countries may not necessarily respond by imposing tariffs across the board. Instead, they could use anti-subsidy and anti-dumping measures, origin checks, transshipment investigations, and supply-chain tracing to raise the cost of exporting Chinese goods, he said.

A coordinated global effort to contain Chinese overcapacity, however, faces significant obstacles because major economies have different interests in their relationships with China.

Countries are likely to “selectively defend themselves” when Chinese imports pose a direct threat to domestic industries, Sun said.

Europe could target Chinese electric vehicles, steel and green-energy products with anti-subsidy measures while continuing to maintain access to the Chinese market, he said.

Japan is likely to move closer to the United States on economic security and supply-chain issues while maintaining trade with China. India, meanwhile, wants to attract production relocating from China, while Southeast Asian countries seek Chinese investment but also worry about becoming conduits for Chinese goods being redirected to other markets.

Sun said Washington is seeking to bring Chinese subsidies, excess capacity, third-country transshipment, and overseas manufacturing into the broader global trade rules agenda.

Multilateral pressure could raise the cost to Beijing of dealing with excess production, he said, but external pressure alone is unlikely to force China to fundamentally change its economic model.

Upcoming Trump-Xi Meeting

The issue could become an increasingly difficult subject at a planned meeting between Trump and Chinese leader Xi Jinping.

Trump confirmed on Sept. 4 at the White House that Xi would visit Washington on Sept. 24.

Huang said the talks could go beyond the immediate question of how much China will purchase from the United States and address whether Beijing is willing to reduce its reliance on a state-led, manufacturing-first and export-oriented economic structure.

“That is much harder than talking about soybeans and airplanes,” Huang said.

Sun said the meeting is unlikely to abandon purchase commitments entirely in favor of demands for structural economic reform. Instead, he expects the two tracks to proceed simultaneously.

In the short term, Washington could seek measurable commitments on purchases of agricultural products, energy and manufactured goods. Over the longer term, it could raise issues including industrial subsidies, support for state-owned enterprises, excess production capacity and weak domestic consumption, Sun said.

If Beijing continues relying on exports to absorb excess capacity, Huang said, U.S. demands could eventually extend beyond increasing Chinese purchases of American goods to reducing China’s dependence on exports.

That would put China’s export-driven economic model and its contribution to global trade imbalances at the center of an increasingly difficult issue for both Beijing and Washington.

Bin Zhao and Gu Xiaohua contributed to this report.