Unlike some other major global powers, China has always treated trade and investments as part of its fundamental development strategy. In that context, political and security considerations played a crucial role in guiding the direction and volume of its business transactions.

Beijing has, therefore, patiently and consistently advocated its calls for “win-win cooperation” and “multilateralism,” even in cases where actual trade numbers were showing its systematic and excessive trade surpluses.

By doing that, China ignored the fact that such trade imbalances were contrary to symmetric and mandatory trade adjustments required by Bretton Woods articles of agreement which had to be enforced by the International Monetary Fund.

The U.S., however, provided a symmetry because the balance of payments of the world has to balance. Decades of Washington’s miscalculations and negligence of its deteriorating trade position led to its soaring foreign debt and massive offshoring of its manufacturing industries to China and the rest of the developing world.

America’s acute trade crises with Japan in 1980s were a wasted prelude to more serious economic problems during Clinton, Bush and Obama administrations. Indeed, the coda written by Obama’s “pivot to Asia” was more about military repositioning than China’s $375.6 billion trade surplus with the U.S. when he left office in 2017.

China’s strong Asia trades

Trump was the first president to raise the trade issue with China. But sadly, his trade officials did nothing to prevent Beijing from making $1.5 trillion on U.S. trades during his first term of office.

Biden, for his part, repeatedly assured Beijing that the U.S. was not seeking a “trade decoupling,” allowing China to pocket another $1.3 trillion surplus on his watch.

Understandably, Trump is now not happy about all that. But help is on the way.

China realizes that in a bitter rivalry a “win-win cooperation” with the U.S. is impossible. Beijing is, therefore, redirecting its trade and investment flows toward countries and areas of the world where China maintains friendly and cooperative political, economic and security relations.

Trade data for the first four months of this year show that East and Central Asia are the focus of China’s business transactions.

With a trade turnover of $331.1 billion, increasing at an annual rate of 8.1% during that period, ASEAN (the ten Southeast Asian countries) remains Beijing’s by far the largest free trade partner. The CAFTA (China-ASEAN free trade agreement) has now been upgraded to allow for freer and more diversified trade flows.

RCEP (Regional Comprehensive Economic Partnership) is a much broader Asian trade area consisting of ASEAN, China, Japan, South Korea, Australia and New Zealand. In the first four months of this year, China’s trade with RCEP came in at $602.1 billion -- accounting for nearly one-third of China’s total foreign trade and absorbing a 7.2% increase of Chinese exports.

G7 asking for IMF trade surveillance

Over the same period, Latin America and Africa, with a combined China trade of $265.3 billion, far exceeded Beijing’s trade transactions with the U.S.  China’s exports to Africa and Latin America increased 15.1% and 11.5% respectively.

A strong effort seems to be under way in China to significantly increase trade with BRICS core members Russia, India, Brazil and South Africa. Special attention is paid to Russia, Brazil and South Africa, where China trades weakened considerably during the first four months of this year. India, in contrast, saw a strong 10% increase of bilateral trade, with Delhi’s blistering 16% rise of imports from China.

China’s trade with the U.S. is now on a mild downtrend of 3%. American purchases of Chinese merchandize declined 2.5%, and Chinese imports from the U.S. were down 5%. Still, the U.S. trade deficit with China is now running at an annual rate of $290 billion, roughly equivalent to the deficit recorded for 2024.

That surplus reflects a structural flaw of a hugely imbalanced U.S.-China trade: U.S. exports to China are three times lower than Chinese sales to the U.S.

Faced with that evidence, Beijing cannot expect any significant thawing of trade relations with Washington. That also means that political and security ties with Washington will remain strained, with spillover effects on global trade and finance, as shown by the communiqué issued last Thursday (May 22, 2025) by the G7 finance ministers and central bank governors.

Preparing a G7 summit in Canada next month, that group emphasized “the need to address excessive imbalances” and called on the IMF “to continue to enhance its analysis of imbalances in both its bilateral and multilateral surveillance.”

That’s a clear warning to China and E.U. countries running excessive trade surpluses.

Beijing may wish to take this as a good advice to step up its current efforts of trade diversification along the lines of shifting political and security alliances.