China's record trade surplus persists despite U.S. tariffs, raising alarm at G7

For eight years, the United States has waged an economic campaign against China, imposing large tariffs on Chinese products before they enter the American market. The campaign has not dented China’s industrial output, according to data and economists cited by the Associated Press.

The world’s second-largest economy is exporting more products than ever, but it is redirecting them away from the U.S. tariff wall and toward more open markets in Europe and elsewhere in Asia. China last year notched a record global trade surplus of $1.2 trillion, despite the sanctions.

The shift in Chinese trade flows risks creating a European sequel to the “China Shock” that wiped out hundreds of thousands of factory jobs in the American heartland in the 2000s and contributed to the political upheaval that helped put Donald Trump in the White House twice.

Earlier this year, French President Emmanuel Macron warned that Chinese exports are “literally killing a large part of the European industry.” He acknowledged that Europe was “slow to see that,” according to the AP.

The warning came as leaders gathered for the G7 summit, where the surge in Chinese exports and its implications for European manufacturing were a topic of concern. The redirection of Chinese goods puts new pressure on European factories, which already face rising energy costs and competition from subsidized state-owned enterprises.

Economists have noted that the U.S. tariff strategy, initiated under Trump and continued under President Joe Biden, aimed to reduce the U.S. trade deficit with China and protect domestic industries. But global trade data show Chinese exports have risen rather than fallen, with the surplus reaching an unprecedented $1.2 trillion in 2025.

The situation echoes the first China Shock, which economists David Autor and others documented as a major cause of job losses in U.S. manufacturing regions. That shock, driven by China’s entry into the World Trade Organization in 2001, contributed to a decline in American manufacturing employment that has never fully reversed.

Now, European policymakers face a similar challenge. The influx of Chinese goods — from solar panels and electric vehicles to industrial machinery — threatens to undercut European producers that cannot match Chinese pricing and scale.

Analysts at HSBC Holdings Plc and other institutions have tracked the shift in Chinese export destinations. Taylor Wang, an HSBC economist, previously noted the accelerated pivot toward Europe and Southeast Asia after U.S. tariffs took effect.

Wendy Cutler, a former U.S. trade negotiator, has said the Trump administration’s tariffs did little to alter China’s export strategy, because Beijing viewed the broader trade relationship as a long-term competition.

The full economic impact on Europe will depend on how the European Union responds. Some EU members have already proposed new tariffs on Chinese electric vehicles, mirroring the U.S. approach. But an escalating trade war between Europe and China could push Beijing to find other markets, including Africa and Latin America, without reducing its overall export volume.