How Trump’s Tariffs Backfired: China Pivoted and Exported Even More

Economic

China–U.S. Trade War

Summary:

Despite aggressive tariffs from the Trump administration, China achieved a record $1 trillion trade surplus in 2025 by pivoting away from the U.S. and expanding into emerging markets....

Export Diversification Strategy Pays Off

One year after President Donald Trump returned to office and imposed a new wave of tariffs on Chinese goods, Beijing’s response has been anything but a concession. Instead of weakening, China’s exports have surged, with outbound shipments growing 5.7% year-on-year in the first 11 months of 2025. Notably, this growth came despite an 18.3% drop in exports to the United States. The shortfall was more than offset by increased shipments to Europe (+8.9%), Southeast Asia (+14.6%), and Africa (+27.2%).

This pivot away from the U.S. market represents a strategic reorientation of Chinese trade patterns rather than a reactive workaround. While the shift was catalyzed by geopolitical tensions and trade restrictions, it leveraged long-term structural advantages: China's manufacturing scale, low-cost competitiveness, and investment in industrial capacity under the “Made in China 2025” initiative. These underlying capabilities allowed China to re-channel goods into receptive, price-sensitive markets with growing demand, particularly in the Global South.

Trade Surplus Reaches Historic Milestone

China's record-setting $1 trillion trade surplus in just 11 months underscores the success of this pivot, but it also highlights global structural tensions. The surplus reflects both China’s dominance in global manufacturing and the relative weakness of its domestic demand. While exports surged, imports rose just 0.2% year-on-year, indicating flatlining consumer activity and a broader imbalance in economic structure.

This external surplus is not just an outcome of trade rerouting; it also results from internal fragilities that suppress domestic consumption. With deflationary trends and subdued real income growth, Chinese households are not spending at levels sufficient to absorb the country’s massive industrial output, forcing producers to look abroad.

Domestic Weakness Driving External Aggression

Behind China’s booming export numbers lies a fragile domestic economy. The property sector, once a primary driver of investment and household wealth, continues its multi-year decline. This has undermined consumer confidence and constrained disposable income, particularly for the middle class, which remains overexposed to real estate assets.

Youth unemployment remains high, and China’s limited social safety net reinforces precautionary savings rather than consumption. These trends collectively reduce internal demand, leading to a self-reinforcing cycle: domestic weakness pushes producers outward, while overcapacity intensifies price wars and deflation at home.

The rise in exports, therefore, is not simply a testament to China’s competitiveness it is also a symptom of economic pressure. Deflation has become entrenched in key sectors, including electric vehicles, e-commerce, and construction materials, prompting the government to occasionally intervene in pricing behavior without launching comprehensive stimulus.

Transshipment Risks and Tariff Evasion Concerns

While China has effectively diversified its export base, some economists warn that the true scale of U.S. market exposure may be understated due to transshipment practices. Goods are increasingly routed through Southeast Asian countries, where they undergo minimal processing before being re-exported to the U.S., complicating tariff enforcement.

Washington has responded by negotiating bilateral transshipment agreements and imposing new levies on third-country intermediaries. However, accurately tracking these flows remains a major challenge, suggesting that part of China’s resilience may stem from circumvention rather than true market substitution.

Global Pushback Intensifies

The global response to China’s expanding export footprint has been swift. The European Union has launched multiple anti-dumping investigations and imposed tariffs on Chinese electric vehicles. French President Emmanuel Macron recently described the trade imbalance with China as “unbearable,” indicating that further barriers may be on the horizon. Similarly, countries like India and Brazil have grown increasingly vocal about the impact of Chinese goods on their domestic industries.

The combination of a real exchange rate depreciation, overproduction, and state-backed industrial policy has made Chinese goods hard to compete with regardless of tariffs. This dynamic risks entrenching China’s global dominance in low- and mid-tech sectors, while pushing more countries toward protectionism.

Leadership Signals: Stay the Course, For Now

Despite the risks, Beijing appears committed to its current approach. At recent Party meetings and in preparation for the upcoming Central Economic Work Conference (CEWC), President Xi Jinping has reiterated priorities focused on industrial strength, national security, and technological self-reliance without signaling major stimulus or a domestic consumption push.

While China is expected to meet its 5% GDP growth target in 2025, largely on the back of exports, the lack of attention to consumption and housing reform has disappointed analysts. Lisheng Wang of Goldman Sachs noted that Beijing is in “no rush” to launch broad-based stimulus, preferring targeted interventions and policy fine-tuning.

Trump’s tariffs may have succeeded in forcing China to adjust but not in the way intended. Rather than scaling back, China has become more globally assertive in its trade footprint, offsetting U.S. losses with gains in developing markets. Yet this export boom is built on a shaky domestic foundation marked by deflation, weak demand, and unresolved structural imbalances. With global trade tensions intensifying and protectionism on the rise, China's strategy of external reliance may offer short-term gains but poses long-term geopolitical and economic risks. As the CEWC approaches, whether China chooses to rebalance or double down will set the tone for the next chapter of global trade dynamics.

Source: CNN

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Gerik

Economic

Real Exchange Rate Weakness Boosting Export Edge

The International Monetary Fund has weighed into the ongoing debate surrounding China’s currency valuation, pointing to the real depreciation of the yuan as a key contributor to the country’s ballooning trade surplus, which surpassed $1 trillion in the first 11 months of 2025. According to the IMF, China’s persistently low inflation, relative to its trading partners, has effectively weakened the yuan in real terms, enhancing the global competitiveness of Chinese exports.

This condition has helped China expand its export dominance even as its domestic economy faces structural weakness. While IMF Managing Director Kristalina Georgieva refrained from explicitly recommending a yuan appreciation, she underscored that China’s current export-led strategy is unsustainable and risks exacerbating already strained global trade relationships.

Export Dependency Risks Deepening Global Friction

“China is simply too big to generate much growth from exports,” Georgieva said, cautioning that dependence on external demand would inevitably intensify trade disputes, particularly as major economies grow more sensitive to domestic industrial erosion. Her remarks reflect a shift in tone from previous IMF assessments that had grown more neutral on the yuan's value since the currency was added to the Fund’s Special Drawing Rights (SDR) basket in 2016.

The IMF now appears to echo the concerns long expressed by trade critics including former US President Donald Trump who accused Beijing of using an artificially weak yuan to maintain a trade advantage. Though China officially operates a "managed float" system and aims to keep the yuan "basically stable," analysts suggest the real exchange rate has declined to its lowest in more than a decade.

Goldman Sachs estimates that the yuan remains around 25% undervalued relative to its fundamentals, even as it heads for its first annual gain since 2021. This divergence underscores the growing tension between nominal exchange rate trends and underlying purchasing power.

Call for Demand-Side Policy Overhaul

Rather than directly calling for a stronger yuan, the IMF emphasized macroeconomic reform as the pathway to restoring balance. Georgieva and IMF mission chief Sonali Jain-Chandra both advocated for stronger domestic demand stimulation to lift inflation and gradually appreciate the real exchange rate. This would ease external imbalances by reducing the reliance on exports and aligning the exchange rate more closely with economic fundamentals.

“Boosting demand would reflate the economy, lift inflation and lead to an appreciation of the real exchange rate,” Jain-Chandra stated. This line of reasoning suggests a causal policy framework: stimulating household consumption and social safety nets leads to higher spending, which supports price growth and makes currency appreciation more feasible and market-driven.

External Imbalances Widen as Surplus Hits 3.3% of GDP

According to the IMF, China’s current account surplus is projected to reach 3.3% of GDP in 2025, up from 2.3% last year and the highest since 2010. Bloomberg’s calculations show that the Q3 surplus alone hit 3.4% of GDP. This widening surplus has once again placed China at the center of global macroeconomic adjustment debates, as many emerging markets and Western economies grapple with competitive pressures stemming from China’s vast export machine.

The real depreciation of the yuan plays a critical role here: with prices falling in China and staying elevated elsewhere, Chinese goods become cheaper globally even if nominal exchange rates remain relatively unchanged. This dynamic has led to fears of "export dumping" in key sectors such as steel, electric vehicles, and consumer electronics.

Policy Path Forward: Structural Reform and FX Flexibility

While avoiding direct accusations of currency manipulation, the IMF is clearly signaling that China’s current path is not aligned with the needs of the global economy. The Fund has renewed its call for greater exchange rate flexibility and more market-driven pricing mechanisms. It has also criticized excessive industrial policy support and called for a redirection of stimulus toward household consumption and social protection, aiming to reduce precautionary savings and foster sustainable growth.

These recommendations, if implemented, would gradually rebalance China's economy from an overreliance on investment and net exports to a more internally driven growth model one less likely to provoke retaliatory trade measures or geopolitical backlash.

The IMF’s latest intervention highlights mounting concerns over the global implications of China’s export-led recovery and the undervaluation of its currency in real terms. While China has made some moves to stabilize the yuan, the Fund is calling for deeper reforms to address the structural roots of external imbalances. Without a transition to consumption-led growth and more flexible exchange rate mechanisms, the risk of renewed global trade conflict may continue to grow especially as China's economic size makes it too large to avoid systemic impact.

Source: Blooomberg

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Samantha Luan

Cryptocurrency

Forex

Key Takeaways:

· Tether expands into AI, robotics, wellness in strategic shift.

· Focus remains on USDT and broader tech developments.

· Four divisions introduced for diversified business focus.

Tether, led by CEO Paolo Ardoino, announced its shift towards AI, robotics, and wellness through four new divisions, signaling an evolution beyond traditional cryptocurrency reliance.

This diversification strategy aims to stabilize Tether's financial position and increase resilience, with implications for USDT, Bitcoin, and broader market dynamics.

Tether has announced a major pivot involving a structural reorganization into four divisions focused on data, finance, power, and education. This move marks a significant shift from their previous crypto-centric approach, expanding into AI, robotics, and wellness applications.

The changes were outlined by Paolo Ardoino, CEO of Tether, who highlighted the company's evolution from a stablecoin-only business to a broader tech group. Tether will retain its USDT operations while diversifying into emerging technologies with notable investments in AI and robotics.

Tether's Strategic Diversification

Tether's strategic diversification impacts industries related to AI and robotics, as well as the traditional cryptocurrency sector. The pivot is expected to create opportunities within health and wellness sectors, enhancing Tether's corporate competitiveness and technological footprint.

Financially, Tether utilizes its excess reserves and profits to fuel these new ventures without impacting USDT operations. This allows Tether to maintain its stablecoin while strategically investing in new market sectors.

Impact on Market Dynamics

Experts anticipate shifts in market dynamics as Tether repositions itself, potentially influencing other stablecoin issuers to explore similar strategies. The company's robust financial reserves support this ambitious transition without risking its core financial products.

The move could lead to new financial, regulatory, and technological protocols within the crypto space. Tether's commitment to innovations like AI and wellness aligns with broader industry trends pursuing diversification to mitigate risks associated with a singular product focus.

"Tether is evolving from a pure stablecoin company into a technology group, investing in AI, robotics, P2P, and critical infrastructure, while keeping financial products as just one of our four pillars." — Paolo Ardoino, CEO, Tether

Source: CryptoSlate

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FastBull Featured

Daily News

[Quick Facts]

1. Ukraine-US Hold Inaugural Working Group Talks on Reconstruction & Peace.

2. US–Swiss tariff slashed to 15%, retroactive to Nov 14.

3. Fed cut 25 bp, dot plot flags one 2026 cut.

4. Timiraos: Three cuts fail to calm FOMC rift, stagflation risk rising.

5. BoC on hold, citing resilient economy.

6. Lagarde: ECB may lift growth forecast.

[News Details]

Ukraine-US Hold Inaugural Working Group Talks on Reconstruction & Peace

On 10 December local time, President Volodymyr Zelenskyy announced via social media that the Ukrainian delegation held its inaugural meeting with U.S. Treasury Secretary Scott Bessent, Presidential Advisor Jared Kushner, and Larry Fink. The session launched the Ukraine Reconstruction & Economic Recovery Task Force.

The two sides engaged in in-depth exchanges on priority reconstruction pillars, implementation architecture, and a shared long-term vision, agreeing that a results-oriented roadmap will accelerate the delivery of concrete outcomes on the ground in Ukraine.

Kyiv presented a 20-point core position paper for a conflict-ending settlement, stressing that overall security is the prerequisite for economic and investment certainty.

A follow-up coordination mechanism was locked in, and Zelenskyy pledged full-throttle engagement to secure concrete outcomes.

US–Swiss tariff slashed to 15%, retroactive to Nov 14

The Swiss government announced on Wednesday that the US has agreed to reduce the import tariff on Swiss goods from 39% to 15%, with the new rate to take effect retroactively as of 14 November 2025.

The duty, introduced in Aug as the highest US levy on any European state, will fall after the 14 Nov MOU in which Swiss firms pledged a combined USD 200 billion in the US by end-2028. For core export lines such as pharmaceuticals, the additional tariff cap will not exceed 15%.

Economics Minister Guy Parmelin, who led talks, warned that possible future U.S. hikes on Rx products remain "a risk". A definitive accord is targeted for Q1-26. Swiss industry welcomed the rollback, saying it restores a level playing field with EU rivals.

Fed cut 25 bp, dot plot flags one 2026 cut

The FOMC lowered the federal funds target range by 25 bp to 3.50 %-3.75 %, in line with consensus, and bringing 2025's cumulative easing to 75 bp.

The decision passed 9-3, the first triple-dissent since 2019. Kansas City Fed's Jeffrey Schmid and Chicago Fed's Austan Goolsbee preferred unchanged. Governor Stephen Miran favored 50 bp, underscoring a clear hawk–dove split.

The dot plot indicates one further cut in 2026 and another in 2027, taking the policy rate back to its 3% long-run level. It also reveals a deeply split FOMC: seven members see no move in 2026, while eight expect at least two cuts.

The Committee revised up its 2026 GDP growth projection by 0.5% to 2.3% and still sees inflation returning below the 2% target only in 2028. The 4.4% unemployment forecast for end-2025 was unchanged. Chair Powell said no one on the FOMC is baselining a rate hike and that the Committee is "very well positioned" to await further data. The post-meeting statement announced $40 bn of Treasury purchases over the next 30 days. Powell indicated the pace could remain elevated for "several months," adding that goods inflation likely peaks in Q1 2026 absent new tariffs.

Timiraos: Three cuts fail to calm FOMC rift; stagflation risk rising

WSJ's Nick Timiraos writes that the FOMC has eased for a third straight meeting, yet officials view the labour market, not inflation, as the bigger threat. Unusually sharp dissent and evenly split views signal little appetite for further cuts. The ultimate path may hinge on Chair Powell's preference.

With Powell's term expiring in May 2026, he will steer only three more rate-setting meetings. Stubborn price pressures amid cooling payrolls recreate an unwelcome 1970s-style trade-off. Stop-go policy then let inflation entrench. UBS chief U.S. economist Jonathan Pingle notes that as the policy rate nears neutral, each additional cut loses votes, data must swing the bloc.

BoC on hold, citing resilient economy

Bank of Canada leaves the overnight rate at 2.25%, in line with consensus. The communiqué reiterates that, should the baseline unfold, the policy rate is "roughly in the range" consistent with price stability. However, high uncertainty means the Governing Council "remains prepared to respond" if the outlook changes. The BoC noted that Q3 real GDP surprised on the upside, chiefly on trade volatility and nascent labour-market firmness. Hiring in trade-sensitive sectors has recently stabilized. Tariffs have created headwinds, yet aggregate activity shows resilience. The Bank projects modest growth next year and CPI returning toward the 2% target, with core inflation expected around 2.5%.

Lagarde: ECB may lift growth forecast

ECB President Lagarde said Thursday that, following September's upgrade, the Governing Council could lift its 2025 euro-area GDP projection at next week's meeting. In September the forecast was raised from 0.9% to 1.2%, the first upward revision since March 2024.

[Today's Focus]

UTC+8 16:30 SNB policy-rate decision

UTC+8 17:00 SNB Governor Martin Schlegel press conference

UTC+8 17:00 IEA Monthly Oil Market Report

UTC+8 17:50 BoE Governor Andrew Bailey speech

TBC OPEC Monthly Oil Report

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Samantha Luan

Stocks

Economic

Coca-Cola said Wednesday that its chief operating officer will become its next CEO in the first quarter of 2026.

The Atlanta beverage giant said its board elected Henrique Braun as CEO effective March 31. James Quincey, Coke's current chairman and CEO, will transition to executive chairman of the company.

Braun, 57, has worked at Coca-Cola for three decades. Prior to assuming the COO role earlier this year, he led operations in Brazil, Latin America, Greater China and South Korea. He has held positions overseeing Coke's supply chain, new business development, marketing, innovation, general management and bottling operations.

Braun was born in California and raised in Brazil. He holds a bachelor's degree in agricultural engineering from the University Federal of Rio de Janeiro, a master of science degree from Michigan State University and an MBA from Georgia State University.

David Weinberg, Coca-Cola's lead independent director, called Quincey, 60, a "transformative leader" who will continue to remain active in the business.

During Quincey's nine years as CEO, Coke added more than 10 additional billion-dollar brands, including BodyArmor and Fairlife. He also brought Coke into the alcoholic drink market with Topo Chico Hard Seltzer, which went on sale in 2021.

In 2020, Quincey led a restructuring that reduced Coke's brands by half and laid off thousands of employees. Quincey said Coke wanted to streamline its structure and focus its investments on fast-growing products like its Simply and Minute Maid juices.

But as Quincey steps down as CEO, Coke is facing numerous challenges, including tepid demand for its products in the U.S. and Europe and increasing customer scrutiny of its ingredients. This summer, after a nudge from President Donald Trump, Coke said it would release a version of its trademark Cola with cane sugar instead of high-fructose corn syrup.

Weinberg said the board is confident that Braun will build on the company's strengths and seek out growth opportunities globally.

Coke shares were flat in after-market trading.

Source: Yahoo Finance

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Winkelmann

Forex

Economic

Political

Britain will strengthen its trade defences by handing its business secretary the power to direct rapid investigations into unfair practices under new rules designed to deal with rising global protectionism, according to draft guidance seen by Reuters.

Britain launched the Trade Remedies Authority (TRA) after it left the European Union, but the independent body has been criticised for being too slow to meet the challenge of a global trade war that risks cheap goods being dumped by the likes of China.

The government will update legislation to give the business and trade secretary the power to direct the TRA to initiate investigations, providing they are justified by evidence and World Trade Organization requirements are met, the document said.

The government added that in a more volatile world, it wanted to ensure elected politicians took major decisions on trade policy.

The new guidance also instructs the TRA to make it easier for a wider range of British producers to contribute to investigations, and says the TRA should become more assertive and agile in tackling unfair trade – by launching investigations and completing them in a timely manner.

"Our trade remedies system, created before globalisation came under today's protectionist threat, now needs to be sharper to meet the demands of a new geopolitical reality," the draft guidance said.

US President Donald Trump launched sweeping global tariffs in 2025 that have led to a surge in Chinese exports to non-US markets like Europe, Australia and South-east Asia.

The EU has unveiled plans to boost Europe's resilience to threats such as dumped imports while France has raised the prospect of tariffs against Beijing.

British Trade Secretary Peter Kyle said the changes to how the TRA works would bring Britain into line with international peers and "give our producers and manufacturers... the backing they need to grow and compete".

TRA co-chief executives Jessica Blakely and Carmen Suarez said they welcomed the initiatives which would help them "defend the British economic interests against unfair international trade practices". REUTERS

Source: Straitstimes

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Justin

Commodity

Political

Vietnam's parliament moved to ban exports of raw rare earth resources as part of an overhaul of the nation's geology and minerals law, which tightens controls over deposits and sets out new rules for the industry.

The government will "strictly" control the exploration, exploitation and processing of rare earths and prohibit exports of raw rare earth minerals, according to the new law, which takes effect in January. Only companies with government approval will be permitted to exploit, process and use rare earths.

The new law says that international cooperation will be encouraged in research, transfer, and development of technologies for the extraction, beneficiation, separation, and deep processing of rare earths to support the development of a domestic rare-earth industry.

Vietnam has reserves of 3.5 million tons of rare earth minerals, ranking it sixth globally, according to the US Geological Survey's March 2025 report. That was a significant revision from the US agency, which had previously estimated that Vietnam had about 22 million tons, the world's second-largest deposits, just behind China.

Rare earths, a family of 17 metallic elements, help power everything from smartphones and laptops to fighter jets and missiles, and are almost exclusively controlled by China.

The amended law also states that deep processing of rare earths must be linked to the development of the industrial ecosystem to enhance the Southeast Asian nation's local value chain and ensure self-reliance in the rare earth sector.

Vietnam's Ministry of Agriculture and Environment is working on a national strategy for rare earth minerals which will be submitted to government early next year, according to a government website post.