BEIJING – China’s effort to become more self‑sufficient is dampening the effect of recent U.S. trade measures, even as the trade deficit with the United States remains sizable. President Donald Trump and President Xi Jinping are set to meet later this week, with businesses hoping for an extension of the trade truce reached last fall.
U.S. customs data shows the deficit with China briefly fell to its lowest level since 2017 in April, but surged again this year as demand for AI‑related components rose, according to Wind Information. Despite diversification attempts, Asia still supplies over 60% of U.S. imports, a share unchanged from previous years, said Jens Eskelund, president of the European Chamber of Commerce in China.
Eskelund estimates that 50‑75% of container traffic from China to Southeast Asia ultimately reaches other markets, accelerating global reliance on Chinese goods. He noted that China hit the 40% share of global container exports forecast for 2030 this summer.
The slowdown in China’s real‑estate sector, which began in 2022, reduced domestic demand, prompting firms to expand overseas. Export volumes rose even as export prices fell, reflecting a shift toward higher‑volume, lower‑margin goods.
High‑tech demand remains mixed. While U.S. data‑center builds for AI have supported Chinese component exports, the CF40 think tank reported a year‑on‑year decline in AI‑related exports in August. Macquarie’s chief China economist Larry Hu warned that recent weakness in the PHLX Semiconductor Index signals a challenging outlook for China’s high‑tech exports over the next six months.
Within technology manufacturing, industrial robot output grew 34.6% year‑on‑year in August, whereas smartphone production dropped 22.3%. Goldman Sachs chief China economist Hui Shan said policymakers see little urgency for further easing absent a sharp labor‑market deterioration, noting a 30% fall in house prices over six years and a rise to 24% of loss‑making industrial firms in 2025.
Competitive pressure is intensifying. A survey by the American Chamber of Commerce in Shanghai found three‑quarters of respondents view Chinese rivals as more advanced, with the perceived quality gap narrowing by six percentage points from the previous year. For the first time since 2022, domestic competition tops geopolitical tension as the chief challenge for members.
The European Union, which holds the largest trade deficit with China, is also tightening scrutiny of Chinese‑origin exports. EU Trade Commissioner Maroš Šefčovič is slated to visit Beijing in October to seek “tangible results” on trade.
Chinese firms continue to dominate supply chains for critical minerals, reinforcing Beijing’s self‑sufficiency agenda. Chad Bown, senior fellow at the Peterson Institute for International Economics, described the strategy as creating a one‑way dependence that China could leverage.
The upcoming Trump‑Xi meeting will likely focus on extending the trade truce, but the underlying dynamics of China’s self‑reliance and the persistent U.S. trade deficit suggest limited room for rapid change.
