Geopolitics have always been the main factor influencing volumes and directions of world trade.

Obama administration’s “pivot to Asia” in 2011 was such a geopolitical event that reinforced existing Asian security faultlines. Ostensibly, that move was meant to increase American political and military presence in Asia-Pacific, and to strengthen alliances in one of the fastest developing segments of world economy.

China – displacing Japan as the world’s second largest economy in 2010 -- understood the message. And that was clarified during the official working visit to the U.S. of China’s newly installed leader Xi Jinping. In early June of 2013, Obama and Xi agreed at California’s Sunnylands to cooperate while properly managing the competitive aspects of U.S.-China relations.

That is still the fundamental policy governing the most important bilateral relationship in the world. China, however, always sought to tone down the adversarial side of that cryptic definition by emphasizing the “win-win cooperation.”

China was right because Obama’s second term of office from 2013 to 2016 ushered in a very good trade business for Beijing. During that time, China ran up a huge surplus of $1.4 trillion on its U.S. trades.

Trump, who took office in January 2017, had a different reading of China’s “win-win cooperation.” During his election rallies in 2016, and the rest of his presidency, he complained about China’s excessive and systematic trade surpluses with the U.S., saying that “we’ve been ripped off by China for a long time.”

U.S.-China trade faces obstacles

And then, he did nothing about it. He apparently realized that America’s massive offshoring of manufacturing operations to China were part of the problem. Interfering with cheap imports from China would have also raised inflation and compromised economic growth at the time when Trump was getting ready to run for the second term.

So, China won again, pocketing a net income of $1.5 trillion on U.S. trades on Trump’s watch.

But after years of trying to make work its “win-win cooperation” with the U.S., China moved to hedge its exposure to American markets by actively diversifying its foreign trade transactions.

And the results are there. A 5.5 percent increase of China’s exports last year lifted the foreign trade volume 3.2 percent, despite a 19 percent decline of China’s U.S. trades.

That was by far the largest loss of China’s foreign trade in 2025, with exports to the U.S declining 19 percent and China’s imports of American goods tumbling 20 percent.

Some observers are seeing a silver lining in future U.S.-China trade business because the new U.S. national security strategy is taking an allegedly less hostile view of China.

That maybe so, but fundamental tensions remain as strong as ever. Taiwan’s status quo, and the U.S. relations with Taipei, are incompatible with Beijing’s position that the island is part of China and an internal matter of China’s sovereign domain. The U.S. also considers that China’s nine-dash maritime borders are illegal and are constantly challenged by U.S. freedom of navigation operations (FONOPs) in the South China Sea.

World trade steady growth

Those are casus belli because they violate China’s sovereignty and territorial integrity – issues where China will not compromise and the U.S. apparently won’t yield.

There are also huge and wide-open bilateral trade conflicts in Panama, Venezuela, Caribbean and Latin America. Canada is also being threatened with 100 percent trade tariffs following its trade agreement with China.

All that does not bode well for U.S.-China political, economic and security relations.

The U.S. trade with its European allies is much better, despite disagreements on matters relating to economic and security policies.

During the first ten months of last year, American trade with the European Union (E.U.) increased 9 percent, with U.S. exports to E.U. rising 12 percent and American imports of E.U. goods edging up 7 percent. That left the E.U. trade surplus with the U.S. roughly unchanged at $191.0 billion compared with the same period of 2024.

And the outlook for trans-Atlantic trade is good. The European trading bloc needs exports because it faces binding fiscal constraints to rev up its sluggish domestic demand. Larger exports to the U.S. can be accommodated within the mutually agreed new trading regime.

Security issues with the U.S. are unlikely to cause trade problems because Germany, Italy and Spain largely agree with the U.S. that the Ukraine crisis must be urgently settled to proceed with an elaboration of a new European security architecture -- and to attend to a much more difficult project of bringing peace to centuries old Middle East enmities.

The E.U. will continue to look for new trade markets and for stronger positions in markets of its existing trade partners, such as China. The E.U. has concluded a trade agreement (Mercosur) with five Latin American countries (Argentina, Bolivia, Brazil, Uruguay and Paraguay). A large E.U.-India trade deal is also under way.

Africa is the next frontier of world trade. China is working hard at it. Last year, China’s trade with Africa soared 18 percent.

The good news is that -- despite higher trade barriers and lingering security tensions – the world trade growth this year is expected to return to its long-term average of about 3.0-3.5 percent.