China’s Trade Surplus, Part I

The world’s biggest economy is exploiting its export prowess to cover for its domestic failures

Donald Trump’s erratic policies have dominated world economic news in 2025. But if U.S. policy weren’t being whipsawed by a wannabe authoritarian’s whims and obsessions, we would all be focused on a different problem: China’s massive trade surplus.

China’s surplus briefly made headlines a few months ago when it passed the trillion-dollar mark. While there is no special significance to that number, it helped bring attention to an important point: that China’s surplus has been surging for years — roughly since 2020.

One doesn’t have to be a crude, Trumpian-style trade protectionist to understand that it’s a major problem for the global economy when an economy the size of China’s – either #1 or #2 in the world, depending upon the measure used – runs persistent, extremely large trade surpluses. China’s trade surpluses are causing major economic disruptions around the world – particularly in the US and in Europe. Furthermore, China is an authoritarian regime. Its growing dominance of several strategic industries poses serious concerns, both in terms of national security and technology capture.

So today’s primer is the first of a two-part series devoted to China’s surplus: How big it is, what’s causing it, why it’s a problem, and what can be done about it.

Beyond the paywall I’ll address the following:

1. How to think about the scale of the Chinese surplus

2. China’s underconsumption problem and the role of Chinese government policies

3. China saves too much for its own good

4. How China’s government has effectively chosen to run trade surpluses

5. The Chinese trade surplus trap

Next week I’ll discuss how China’s surplus causes problems for the rest of the world, and how other nations — especially in Europe — should respond.