China’s Export Shift 📦

No one likes bitterness. But not the Chinese. 

In fact, their strength lies in it. That’s why they even have a word for it. Chiku in Mandarin means “to eat bitterness” — a philosophy of enduring pain and hardship with patience and discipline. It is this philosophy that guided China for centuries through dynasties, revolutions, famine, war, and modernization. 

Today, the Chinese government is following this exact philosophy when it comes to President Trump and his tariffs. Since President Trump’s return to the White House in January 2025, China’s exports to the U.S. have been sliding fast. According to Chinese Customs data, in the first half of 2025, China shipped about $215.6 billion worth of goods to the U.S. — a 10.7% decrease from the previous year. 

And it has been in a downward spiral since. In August 2025, exports to the U.S. declined nearly 33% from the previous year, marking the fifth consecutive month of double-digit decreases.

But not everything is bitter for China. 

It is on track to smash last year’s record trade surplus of nearly $1 trillion, racking up $102 billion in August alone and more than $785 billion in the first eight months of 2025.

This means China is still exporting plenty, but just not to the United States. 

In this issue of CrossDock, we break down the history of China–U.S. exports and how Trump’s tariffs are reshaping it. We also spotlight the new markets and geographies Beijing is doubling down on to keep its export engine humming.

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China in the 1970s was a struggling nation. Factories sat idle, agriculture lagged, and living standards had collapsed. A decade-long Cultural Revolution had left the economy in ruins.

But with Mao Zedong’s death in 1976, China buried its old barriers. Under Deng Xiaoping, the country launched the Reform and Opening Up program, which invited foreign investment, loosened state control, and created Special Economic Zones. These zones offered tax breaks, cheap land, and access to a massive pool of low-cost labor.

By the 1980s and 1990s, U.S. corporations began shifting manufacturing to China on a large scale to cut production costs. Tech players like Apple, IBM, and HP leaned on Chinese factories for parts and assembly, while automakers such as GM and Ford set up joint ventures in Shanghai. Apparel brands and machinery makers quickly followed, drawn by cheap labor, improving infrastructure, and government incentives.

It was a symbiotic deal: with the help of low-cost labor, American firms slashed costs and grew margins, while China absorbed technology, processes, and know-how. Those lessons laid the foundation for its transformation into the world’s manufacturing powerhouse.

And it all showed up in the numbers. U.S. imports from China almost doubled in just five years — rising from $51.5 billion in 1996 to $102 billion by 2001. 

Then came the real turning point: China’s entry into the World Trade Organization in 2001. This membership granted Beijing full access to U.S. and European markets, thereby reassuring foreign investors. Global companies poured in capital, technology, and supply chains, while China supplied labor, infrastructure, and scale.

By 2010, China accounted for roughly 20% of global manufacturing output — surpassing the United States to become the world’s largest manufacturer. And in 2014, China overtook Canada to become America’s top trading partner — but it was a relationship built on imbalance. That year, the U.S. ran a $343 billion goods trade deficit with China, importing nearly four times as much as it exported to the country.

To tackle this imbalance, President Trump, in his first term, dusted off an 18th-century trade weapon that once deepened the Great Depression: tariffs. 

Beginning in 2018, his administration imposed tariffs ranging from 10 to 25% on Chinese goods — covering more than $360 billion in imports and triggering the US-China trade war. 

Eventually, in January 2020, Washington and Beijing signed a “Phase One” deal: China pledged to buy more U.S. farm and energy products, while the U.S. agreed to pause further tariffs. But nothing took off.

So, President Trump picked up from where he left off. 

However, the tariffs have achieved their intended purpose: reducing Chinese imports. 

In May, the U.S. accounted for just 7.1% of China’s total exports — the lowest share recorded since 2001. For context, when Trump first took office in 2017, the American market absorbed nearly 18% of China’s exports.

In the first eight months of the year, shipments dropped by 15.5% compared to the same period in 2024, according to China Customs data. For the first time in decades, the U.S. slipped to third place among China’s overall trading partners. 

The damage has spread across almost every major product category. Electrical machinery exports collapsed by more than 40% year-on-year in May. Apparel — where China has long been America’s biggest supplier — also took a hit: in May 2025, the U.S. imported just $556 million of clothing from China, down from $796 million in April, the lowest monthly level in 22 years.

Interestingly, the deterioration was not just limited to goods hit with tariffs. Take smartphones, for instance. Despite having no tariffs, the U.S. sourced only 25% of its shipments from China between April and June, down from 61% the previous year, according to Canalys data. By August, the pain was even sharper in the technology sector. A Goldman Sachs analysis showed Chinese tech exports to the U.S. had plunged 70% compared to Q4 2024 — a staggering collapse in less than a year.

While exports to the U.S. declined, China found new markets to sustain its factories, and some of them were very close to home.

Since the first trade war with the U.S. in 2018, China has worked to diversify its foreign trade. By 2024, the U.S. made up just 10.8% of China’s total trade, down from 14.2% in 2017, according to China’s General Administration of Customs. ASEAN — an association of 10 Southeast Asian countries – has filled much of that gap: the bloc has become China’s largest trading partner, climbing to 16.2% of China’s trade in 2024, up from 12.5% in 2017.

This trend has only intensified in 2025. Exports to ASEAN countries increased by 13% in the first half of 2025 compared to H1 2024 — a rise worth $37.1 billion.

Over the years, ASEAN countries have become China’s alternative hub — not just for direct exports, but also for transshipment and assembly. Chinese goods are increasingly routed through countries like Vietnam, Malaysia, and Cambodia, where they’re finished or relabeled before heading to Western markets. 

Interestingly, China has also been investing heavily in the region to diversify supply chains. For example, over the last decade (2015–2024), China accounted for 21% of all new project investment in Southeast Asia, up from just 13% in the decade before 2015, according to the Lowy Institute.

In May 2025, China and the Association of Southeast Asian Nations (ASEAN) wrapped up negotiations to upgrade their free trade agreement — expanding it to cover the digital economy, green industries, and other emerging sectors, according to China’s commerce ministry. The deal is set to be formally signed before the end of the year, further deepening China’s ties with its largest trading partner.

Interestingly, China’s export game hasn’t just strengthened in Asia — it’s also setting new records in Europe.

Europe has quietly become China’s next big export story. Chinese exports to the EU in August 2025 increased 10%. What’s interesting is that the increase in shipments of hi-tech goods to the EU is soaring. For example, the Lithium-ion battery exports from China to the EU jumped 52% year-on-year, and the EU import of hybrid cars from China has almost risen to 400%, according to South China Morning Post. 

To better understand this phenomenon, let’s take the example of Germany. As the EU’s biggest economy and China’s top trading partner in the bloc, it has felt the surge firsthand. German imports from China jumped 10.5% to €97.6 billion in the first seven months of 2025 — more than twice the pace of total import growth. Copper was up 91%, apparel 24%, and toys also surged, according to the Institute for Employment Research. It’s not just low-value goods; smartphone exports to Germany jumped to a whopping 222% in May, while laptop shipments climbed 33%. 

The result: Germany saw its trade deficit with China soar 142.8% to US$17.4 billion in the first eight months of 2025, up from US$7.2 billion a year earlier. 

It’s also worth noting that relations between Europe and China are far from smooth. Jens Eskelund, president of the EU Chamber of Commerce in China, warned that the surge in Chinese exports is colliding with growing distrust. German Chancellor Friedrich Merz pledged to cut Germany’s reliance on Chinese raw materials, warning that Beijing is poised to exploit trade vulnerabilities. 

In fact, Brussels has been pressing Beijing to rebalance trade after the bloc’s deficit with China hit €305.8 billion in 2024, and tensions flared when China restricted exports of seven critical raw materials. 

While Europe is bracing with restrictions, Africa is throwing its doors open — welcoming Chinese goods and investment.

China’s exports to Africa surged 25% in the first eight months of 2025, reaching US$140.8 billion, according to China’s General Administration of Customs data. That’s already more than the entire trade of 2020, and the total trade between them is on track to exceed US$200 billion for the first time. Nigeria, South Africa, and Egypt are the biggest African buyers of Chinese products. 

Africa’s exports to China are still dominated by raw materials and commodities, with a smaller but steadily growing slice of agricultural goods. China exports mainly high-value manufactured goods — from heavy machinery and electronics to the latest green technologies.

This year, Chinese export of steel and iron components to Africa — critical for bridges, towers, and scaffolding — jumped 43%. Battery sales surged 41%, while transformers and converters, including inverters that adapt solar and wind power for homes and factories, rose nearly 25%.

Interestingly, the US-China tariff war has strengthened China’s exports to Africa, a region that Xi Jinping has been cultivating since the launch of the Belt and Road Initiative in 2013. As of 2025, 53 countries on the continent are part of the BRI.

To further cement ties, China has rolled out a zero-tariff policy for goods from 53 African nations with which it maintains diplomatic relations.

If Africa is China’s fastest-growing export frontier, India has always been the trickiest neighbor to crack for China — but that seems to be changing. 

In August 2025, India bought a record $12.5 billion worth of goods from China, making Beijing its biggest trading partner for the month. The U.S., once on top, slipped behind as Washington’s 50% tariffs cut into Indian exports.

Interestingly, the surge in India–China trade is being powered by Apple’s supply chain shift. iPhones may now be assembled in India, but the backbone still runs through China. In July alone, $1 billion worth of computer chips were shipped from China to India.

After years of friction, tariffs are pushing the two neighbors closer together. Take the seafood industry: in fiscal year 2024–25, India exported approximately $2.71 billion worth of seafood to the United States, its leading destination. But those flows are now heavily impacted by the 50% tariff. The result: Indian exporters are turning to China to keep their businesses afloat.

Similarly, Beijing has lifted export curbs on a range of critical products to India, including fertilizers, rare earth magnets and minerals, as well as tunnel-boring machines, according to Indian media reports.

This trade relationship is still in its nascent stage, but the potential is enormous. India, set to become the world’s third-largest economy, and China, already the second-largest and most populous country, are natural trade partners. Together, their scale and demand could reshape global supply chains.

So, the big question is, can China fully replace its exports to the United States by diversifying to other countries and regions? Let’s break it down.

It’s not as though China now enjoys a free pass to export everywhere. Many countries are pushing back. The U.S. has been especially aggressive — imposing sweeping tariffs, targeting transshipment routes, and tightening origin rules. Meanwhile, long-time Chinese trade partners are also reacting.

Take Mexico, for example. Under pressure from Washington not to serve as a backdoor for Chinese goods, Mexico has moved to raise tariffs on Chinese imports, including a proposed 50% duty on Chinese automobiles. 

Brazil, despite years of deep trade ties with China, has also slapped tariffs on Chinese electric vehicles. The U.S. is systematically attempting to block Chinese exports from reaching American consumers through other countries.

For example, Vietnam and Cambodia have been targeted by transshipment tariffs aimed at penalizing Chinese goods that reroute through them. 

Under the new U.S.–Vietnam framework, ordinary Vietnamese exports may face ~20% tariffs, but goods deemed transshipped from China face ~40% tariffs. Take solar panels as a case in point. In April 2025, the U.S. Commerce Department announced tariffs as high as 3,521% on imports from Cambodia, Thailand, Malaysia, and Vietnam. The move targeted Chinese solar companies that had shifted production to Southeast Asia to sidestep earlier tariffs, only to flood the U.S. market with cut-price panels. 

And with China’s domestic consumption still sluggish — weighed down by weak household spending, a soft property market, and high youth unemployment — Beijing cannot simply pivot inward to absorb the excess capacity.

It is also worth noting that China has always played the waiting game, unlike other countries that have rushed to the negotiation table with the U.S. Beijing prefers patience, calculating when to respond and how much leverage to show. And that patience may matter even more now: when the U.S. and China convene again next month, China will not come empty-handed.

For one, Beijing still wields near-total control over critical minerals and rare earth magnets — inputs the U.S. defense and tech industries depend on. At the same time, it has moved to ban Nvidia’s chips from its domestic market. Given that China is one of Nvidia’s largest buyers, this ban gives Beijing direct leverage over one of America’s most valuable companies.

Therefore, the next round of talks will focus less on tariffs alone and more on how both sides deploy their negotiating strategies. What’s most important is that both sides should avoid ending up eating the chiku!

This newsletter was written by Shyam Gowtham

Thank you for reading. We’ll see you at the next edition!