China Has a $1 Trillion Head Start in Any Tariff Fight

China's trade surplus shows Western efforts to reduce dependence on China are coming up short

- Jason Douglas

Donald Trump kicked off a new era of Western economic rivalry with Beijing when he took office in 2017. As he prepares for his second term, China's dominance of global manufacturing is greater than ever.

China just posted a trade surplus with the rest of the world of almost $1 trillion for 2024, according to official data released this week. That giant gap between exports and imports—roughly equal to the annual output of Poland—is now three times what it was in 2018 when decades of Western orthodoxy favoring open trade were upended by Trump's tariffs on Chinese imports.

China today accounts for around 27% of global industrial production, according to United Nations data, up from 24% in 2018. By 2030, the U.N. predicts, China's share of industry will have risen to 45%—a level of dominance unmatched since the U.S.'s postwar manufacturing heyday or the U.K.'s in the 19th century.

For Washington and its allies, this ascendancy shows that efforts to reduce their dependence on China are coming up short. That suggests it will remain hard for Trump to rebalance U.S.-China trade relations, even if he pushes tariffs higher.

Over the past several years, the U.S. has placed tariffs on billions of dollars of Chinese imports and offered subsidies to chip makers and other companies in strategic industries. To varying degrees, governments from Berlin to Tokyo have embraced a similar policy mix to rejuvenate their factory sectors and shield strategic champions from Chinese competition.

But China has responded by finding other customers, subsidizing its factories and working around the levies by moving production to other countries. Those strategies are keeping China's factory floor intact for now, though its economic problems are multiplying, with excess capacity, the specter of deflation and collapsing corporate profits all weighing on growth.