Invest1 publisher3 min readPublished
China books a record $1.2 trillion surplus. Its exports to America are falling
Xi meets Trump on Wednesday holding a surplus built outside the American market. Two Pew readings that bear on enforcement, Canadian trust and German belief that Washington weighs other countries' interests, have each fallen by more than half.
The Investor · Invest desk
What happened
- Trump begins two days of meetings with Xi Jinping on Wednesday, after years of tariffs, technology restrictions and pressure on allies to cut their dependence on Beijing.
- The Lowy Institute scored US defence networks at 81.4 out of 100 for 2025 against 18.9 for China, and CNBC reports Beijing still lacks anything comparable.
- Pew Research Center found in June that the share of Canadians describing the United States as a reliable partner had fallen to 35% this year from 83% in 2022.
- Canada was invited this month to become the European Union's first associate member as Mark Carney's government seeks deeper defence ties with Europe and less reliance on the United States.
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Why it matters
- constraint A technology restriction only works where it is enforced, so the same Washington measure now buys less than it did when major economies in Europe and Asia moved with it.
- exposure A China risk model built on coalition-enforced bans is exposed twice over: the ban can be routed around, and the rare-earth inputs stay with one supplier.
- decision Ottawa's turn toward Europe puts a second defence and procurement rulebook in play for suppliers that had treated Canada as an extension of the US market.
- contradiction The alliance structure and the appetite to use it now point opposite ways, and it is the appetite that a summit or a quieter year with Ottawa and Berlin can move.
Tariffs only reach one channel: goods arriving in the United States. CNBC did not report the size of the decline in China's US-bound exports [17]. Two straight years of a global surplus above $1 trillion puts at least $2.2 trillion through every other channel across 2025 and 2026 combined [3][18].
Allied willingness, unlike allied capacity, shows up in survey data. Germany's Pew reading on whether Washington considers other countries' interests fell 37 points, to 23% from 60% in 2023 [7][20], and Canada's reliability figure lost 58% of its 2022 level [19]. "When democratic countries don't have public support for a counterpart, it raises the cost for leaders to align with the United States," Ryan Hass of the Brookings Institution's John L. Thornton China Center told CNBC [12]. "It lowers the cost for leaders to defy the United States" [13].
American capacity is intact. Lowy's 2025 scoring put the US defence network at 4.3 times China's [21], and Hass said "America retains unmatched power on the world stage, but leverage requires a united front and there are a shrinking number of countries willing to follow America's lead right now" [11]. The bar for Beijing is lower: Hass and other China experts told CNBC it only needs allies to become less willing to move with Washington [16].
Melanie Hart, senior director of the Atlantic Council's Global China Hub, said "Although our biggest economic complaints regarding China's economy are shared by many of our allies and partners, the current U.S. approach is to attack all of those countries ... instead of forming a common front" [14]. Allies, she said, "worry that as soon as they make a deal with us, Washington will undercut them in some way that they will then regret" [15]. Xi visited India this month for the first time in seven years, with troops from both countries still deployed along their disputed Himalayan border [9][25].
Rare earths are the instrument Beijing can use alone, and CNBC names them as its most notable source of leverage [4]. American diplomatic effort this year went into fights with NATO over defence spending, a threatened troop reduction in much of Europe, added troops in Greenland, and tariffs on Canada [22]. Hass also said China "is presenting itself to the world as the stable counterweight to an erratic and violent United States" [10].
I'd expect the durable exposure for anyone with China in the supply chain to sit on the input side, where Beijing can act on its own. The same data supports a counter-thesis: willingness moves faster than capacity in both directions, the 81.4 score says the machinery still exists [5], and two days of meetings can reset tone [1]. The thesis is wrong if Pew's next readings on US reliability turn up, or if the next American export-control action arrives co-signed.
What to watch
- Whether the two days of meetings produce any published terms on rare-earth supply, with a volume attached.
- Whether Xi's India opening this month turns into tariff, border or procurement movement between the two.
- Whether the troops announced for Greenland on Tuesday proceed, and how Copenhagen and Ottawa answer.