US isn’t winning trade war despite drop in its imports from China

China’s exports to the United States have dropped 26% year‑on‑year in the eight months after United States President Donald Trump imposed extra tariffs on imports from China in April.

Yet the time for Trump to take a victory lap is not at hand as China’s global trade surplus has continued to swell to record highs.

And now commentators judge from his new US National Security Strategy report that the president and his administration may be starting to come to terms with the poor prospects for winning the trade war anytime soon. Some of what Trump’s critics would call overconfidence was toned down when he released the report on December 4.

It’s not that Trump acknowledged any error on his own part. As usual he blamed his predecessors for US problems with China, saying that, although they had long believed that opening US markets and encouraging investment in China while outsourcing manufacturing would draw Beijing into a “rules‑based international order,” the outcome was opposite. 

Aspirations for ‘balance’

“China got rich and powerful, and used its wealth and power to its considerable advantage,” the report said. “American elites – over four successive administrations of both political parties – were either willing enablers of China’s strategy or in denial.”

The report said that Trump had single‑handedly reversed more than three decades of mistaken American assumptions about China, as his administration’s ultimate goal is to lay the foundation for long-term economic vitality.

What caught many Asia-focused readers’ attention was that, after all the crash and burn of the Trump tariffs offensive, the prose regarding China was comparatively mild. The report spoke repeatedly of Washington’s aspirations for “balance”:

Going forward, we will rebalance America’s economic relationship with China, prioritizing reciprocity and fairness to restore American economic independence.

Trade with China should be balanced and focused on non-sensitive factors. If America remains on a growth path and can sustain that while maintaining a genuinely mutually advantageous economic relationship with Beijing, we should be headed from our present $30 trillion economy in 2025 to $40 trillion in the 2030s, putting our country in an enviable position to maintain our status as the world’s leading economy.

The report said China had recycled about $1.3 trillion of its trade surpluses into loans across the Global South, a move that will create new national‑security and economic challenges for the US and its allies. It noted that Europe, Japan, South Korea and others jointly hold roughly $7 trillion in net foreign assets, while international financial institutions, including the multilateral development banks, possess combined assets of $1.5 trillion – but their collective capacity has “not been strategically aligned.”

It pledged reforms to multilateral development institutions to ensure they “serve American interests” and operate with greater discipline.

The report also urged allies, including Europe, Japan, Korea, Australia, Canada and Mexico, to adopt policies that help shift China’s growth toward household consumption, arguing that “Southeast Asia, Latin America and the Middle East cannot absorb China’s excess capacity.”

Chinese netizens detect a softer tone

While the latest US National Security Strategy sharply criticized the United States’ 30-year engagement with China, some Chinese commentators said the document actually reflects a softer tone toward China.

“Although the report still devotes substantial space to Taiwan, the South China Sea and other China‑related issues, its wording is noticeably milder than earlier editions,” Guoping, a Zhejiang‑based military columnist, writes in his article. “Washington now labels China less as its biggest challenge and more as an economic competitor.”

However, he added, “the softer wording does not mean the US has become kinder toward China. It is because China’s strength has grown. After years of trade, technology, financial and public‑opinion battles, the US has failed to achieve the outcomes it expected. These signals show Washington is running out of cards to contain China’s rise.”

He says the US is no longer pursuing global hegemony or acting as the world’s policeman, but is concentrating its strategic focus on the Western Hemisphere and reinforcing leadership mainly in North America.

US pivot – but to the south

Chinese state media highlighted the National Security Strategy’s renewed emphasis on enforcing the so‑called Monroe Doctrine as part of Washington’s effort to reassert American preeminence in the Western Hemisphere.

The doctrine, first articulated by President James Monroe in 1823, declared that the US would reject interference by faraway powers and assert its leadership across the hemisphere. 

“America has changed its wording and shifted the key arena of competition, but has not given up its strategic‑competition thinking,” Li Haidong, a professor at China Foreign Affairs University, told the Global Times. 

“In areas such as technology and supply chains, Washington seeks to eliminate factors from outside the region that threaten US interests, a signal that its strategic competition with China remains unchanged. The only difference is that the US will put more focus on the Western Hemisphere,” Li said.

The numbers

Regardless of what may be achieved by any such policy pivot, much of the history of the US-China trade war and the Trump tariffs will be told in numbers. And the numbers so far are daunting from the American standpoint.

Facing an average 55% US tariff, many Chinese and foreign manufacturers shifted part or all of their production lines to ASEAN economies, including Vietnam, Thailand, and Indonesia, to benefit from a more manageable 20% tariff.

While Chinese manufacturers bore relocation costs and workers lost jobs as production shifted overseas, the negative impact of this development on the broader Chinese economy remained limited.

By making products in Southeast Asia for the US markets and increasing higher‑value exports to Europe, China successfully boosted its total exports by 5.4% to US$3.41 trillion in the first 11 months of this year from a year earlier. It also recorded a 21.6% rise in its trade surplus to US$1.08 trillion over the same period, according to China Customs.

After seeing a 4.5% year‑on‑year increase in the first three months of this year, China’s exports to the US turned to a 26% year-on-year drop between April and November. The decline followed Trump’s April 2 rollout of global reciprocal tariffs, which included a strong target on Chinese imports. Washington at one point raised tariffs on Chinese products to 145% before agreeing to lower the rate to about 55% in June.

During the first 11 months of this year, China’s exports to the US decreased by US$89 billion, or 18.9%, to US$385.9 billion from a year ago. Over the same period, its exports to ASEAN surged by US$72 billion, or 13.7%, to US$599 billion. Other routing channels included Hong Kong, India, Mexico, and Latin America.

European Union members and the United Kingdom also helped China relieve pressure from the Sino-US trade war by buying more Chinese goods. China’s exports to the EU rose 8.1% to US$508 billion in the first 11 months of this year from a year earlier. Shipments to Germany and Italy each climbed 10.2%, while exports to France advanced 7.9%. China’s exports to the UK rose 7.3%.

Read: Is Canon’s factory closure tied to strains in China-Japan ties?

Follow Jeff Pao on Twitter at @jeffpao3