A $1.2 Trillion Surplus Is a Forecast, Not a Fixture

China's trade surplus reached nearly $1.2 trillion in 2025, the largest in recorded history, and it grew at three times the rate of global goods trade ^[1][2][3]. Michael Froman, writing in Foreign Affairs, argues that the world's ability to absorb that output is approaching a breaking point, and that the break would arrive as a global economic crisis at a moment when governments are poorly equipped to manage the fallout ^[4][5].

His case is arithmetic rather than moral. China accounts for roughly 30 percent of global industrial production and, according to a 2024 UN report he cites, is expected to reach 45 percent by 2030 ^[6], a gain of 15 percentage points, or half again its current share ^[7]. Froman notes no historical precedent for that concentration of industrial power other than the United States immediately after the Second World War ^[8], and that measured as a share of global GDP, China's manufactured goods surplus is larger than the combined surpluses of Germany and Japan at any point in the 1980s ^[9]. Growing exports at two or three times the rate of world growth worked when the base was small; at current scale, he writes, the strategy eventually runs out of customers, and Beijing has outgrown its model ^[10][11].

For anyone buying, selling or financing goods, the operative question is where the low price comes from. The OECD has estimated that 60 percent of China's gains in global manufacturing market share were driven by government subsidies ^[12], and Froman identifies the largest implicit subsidy as access to the state-directed financial system, which channels credit to prioritised sectors so firms can expand without the concern for profit and return their international peers carry ^[13]. The result he describes is a self-defeating race to the bottom in which firms price below cost ^[14]. A below-cost price is a policy output, not a cost structure. Building a 2027 cost plan on a decade of imported disinflation is a bet that the policy holds and that importing countries keep accepting the volume.

Both halves of that bet are eroding. Froman describes an international environment that has turned toxic, a political appetite for deindustrialisation and critical dependencies that is finite and shrinking, and rising protectionism that would cut Chinese manufacturers' market access and short-circuit the dual circulation strategy Beijing introduced in 2020 ^[15][16][17]. He also observes that global consensus on the nature of the problem is stronger than ever and has had little effect on Chinese policy ^[18]. That combination is the planning-relevant part: agreement without behaviour change means the adjustment shows up as a tariff schedule rather than a negotiated glide path.

The demand side is the exposure most firms have not priced. Froman argues a stall in the Chinese export machine would hurt China most, but would send shock waves through its major trading partners in the Asia Pacific and through other economies intertwined with it, with the United States not immune though the only actor with the economic and institutional capacity to stabilise the global economy ^[19][20][21]. Companies whose revenue depends on Chinese industrial demand and whose margin depends on Chinese industrial supply are exposed at both ends of the same event.

What to watch: Froman's proposed off-ramp is a preemptive and gradual rebalancing of the Chinese economy, long advocated by the United States and, he argues, now a necessity rather than a preference ^[22]. Absent that, watch the growth multiple of the surplus against global goods trade, whether the industrial production share tracks toward 45 percent, and whether new trade measures land as sector carve-outs or as broad walls.