China export resilience shapes U.S. trade talks calculus

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China export resilience in trade talks

Highlights

China's trade surplus with the U.S. remains large in 2024, driven by continued demand for AI-related components despite longstanding tariffs.
China accounts for 40% of global container exports as of summer 2024, reaching a milestone originally projected for 2030 and intensifying global competition.
Domestic weakness persists with house prices down 30% over six years and 24% of industrial firms expected to be loss-making in 2025, increasing pressure on Chinese companies to expand abroad.

Export strength and self-sufficiency reshape talks

As reported by CNBC, China’s trade surplus with the U.S. remains large even after years of tariffs, and recent demand for AI-related components is helping lift the U.S. trade deficit with China again this year, based on China Customs data accessed through Wind Information. Businesses are hoping mainly for an extension of the trade truce reached last fall, while U.S. concerns about artificial intelligence are gaining prominence ahead of the leaders’ summit.

China’s broader position in global goods flows also remains difficult to dislodge. Jens Eskelund, president of the European Chamber of Commerce in China, says Asia still accounts for more than 60% of U.S. imports, unchanged from before “Liberation Day,” and estimates that between half and three-quarters of container traffic from China to Southeast Asia then moves on to other destinations.

Eskelund says China has already reached a milestone he had expected only in 2030, accounting for 40% of global container exports this summer. He argues the country’s export dominance accelerates after 2022, when the property downturn weakens domestic demand and companies intensify their international expansion.

Domestic weakness meets rising global competition

Even with exports providing support, China’s domestic economy continues to face significant strain. The real estate slump that begins in 2022 is weighing on consumption, while CF40 estimates that AI-related exports fall significantly in August from a year earlier, signaling that one recent source of export momentum may be weakening.

Macquarie chief China economist Larry Hu says the recent performance of the PHLX Semiconductor Index, which he views as a guide to China’s high-tech exports over the following six months, does not bode well for the next year’s export outlook. Still, economists do not expect a major policy response, with Goldman Sachs chief China economist Hui Shan saying policymakers show limited urgency to add easing measures unless the labor market deteriorates sharply.

Shan says house prices have already fallen about 30% over six years, in line with major property downturns seen elsewhere, while weak labor markets and falling rents are likely to prolong the slump in many parts of China. Loss-making companies are also increasing, accounting for 24% of China’s industrial firms in 2025.

The tougher domestic backdrop is pushing Chinese companies into fiercer competition at home and abroad. The American Chamber of Commerce in Shanghai says three-quarters of surveyed members see Chinese rivals as more advanced, while the perceived gap in product quality narrows by 6 percentage points from last year, and domestic competition overtakes geopolitical tensions as the top business challenge for the first time since 2022.

That pressure is increasingly spilling into overseas markets as well. European Union officials are stepping up scrutiny of China-origin exports, and EU Trade Commissioner Maroš Šefčovič, who calls for tangible results from China on trade by October, is expected to visit Beijing next month. Alongside lower-cost goods, China is also strengthening control over critical mineral supply chains, reinforcing a self-sufficiency strategy that, as Peterson Institute senior fellow Chad Bown says, appears increasingly insulated from whatever actions the rest of the world might take.

Our earlier report on the U.S.-China trade truce ahead of the Trump-Xi summit highlighted that key commitments are moving at different speeds, with measurable progress in soybean purchases but far less transparency on Boeing aircraft orders. It also noted that rare earth magnet shipments remain the clearest strategic test, as ongoing licensing delays and uneven export volumes keep supply-chain uncertainty high despite the détente.

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