Despite facing the impact of Trump's tariff policies this year, global trade growth has exceeded market expectations, with China's export resilience standing out. According to the latest data from the World Trade Organization (WTO), China's share of global goods exports rose to 14.2% in the first half of the year, a record high for the same period. So, what underpins China's export resilience amid heightened uncertainties? An analysis of export destinations and product structures reveals that China's export growth is supported by supply chain adjustments and the transformation of its manufacturing sector, though certain risks remain. In the coming year, China must remain vigilant against weakening global economic momentum and potential disruptions from recurring trade conflicts.
**Diversification of Export Markets** During his first term, Trump initiated the U.S.-China trade conflict, starting with the Section 232 investigation in February 2018 and imposing 25% and 10% tariffs on Chinese steel and aluminum imports in March. After returning to the White House this year, Trump reignited the tariff war. Although broader in scope, China—as the primary source of the U.S. trade deficit—bore the brunt of these measures. In February and March, the U.S. imposed two rounds of 10% "fentanyl tariffs" on Chinese exports, followed by "reciprocal tariffs" in April, raising rates from 34% to 84% and later 125%. Talks in Geneva in May led to a mutual reduction, with U.S. tariffs on Chinese goods reverting to 30% and a 90-day suspension of the 24% tariff, later extended in August. By October, trade tensions flared again, but negotiations in Kuala Lumpur resulted in agreements, including the removal of the 10% "fentanyl tariff" from November 2025 and a one-year extension of the 24% tariff suspension.
In the initial phase of the first tariff conflict, China's exports to the U.S. were only marginally affected, with year-on-year declines starting in December 2018. However, the current round has accelerated decoupling, with China's exports to the U.S. turning negative in April and sustaining double-digit declines for seven consecutive months, cumulatively dropping 17.8% in the first 10 months. Yet, reduced reliance on the U.S. market—with its share falling from 20% in 2018 to around 10%—has mitigated the overall impact. The U.S. market dragged China's total export growth down by 2.6 percentage points in the first 10 months.
**Shift to Non-U.S. Markets** The decline in U.S. dependence has been offset by increased exports to non-U.S. regions, enhancing market diversification. Tariff differentials have redirected trade to third-party markets, while China's Belt and Road Initiative has deepened economic ties with these regions. In the first 10 months, exports to ASEAN and Africa grew by 14.3% and 26.1%, respectively, contributing 2.3 and 1.3 percentage points to overall export growth. Meanwhile, improved European demand and stronger China-EU cooperation lifted exports to the EU by 7.5%, adding 1.1 percentage points to growth.
**Optimization of Export Structure** China's export product mix has also improved. Under the Harmonized System (HS), exports are categorized into agricultural and mineral products, primary industrial goods, advanced industrial goods, and others. Industrial goods dominate, with advanced industrial products reaching a record 53.3% share in September, up 1.3 percentage points year-on-year. Machinery/audio equipment (HS XVI) and vehicles/transport equipment (HS XVII) were key drivers, with shares rising to 42.6% and 8.5%, respectively. Advanced industrial goods contributed 4.8 percentage points to export growth in the first nine months, reflecting China's manufacturing upgrade and rising competitiveness.
The Revealed Comparative Advantage (RCA) index, which measures a country's export competitiveness in specific products, shows China's industrial goods RCA consistently above 1 since 2011, with notable gains in low- and medium-tech categories. By 2024, China's share of global industrial exports reached 20%, up 2.5 percentage points from 2018, driven by tech-intensive goods. Even labor-intensive products maintained growth, rising to 30.5% of global exports.
**Underlying Risks** While trade diversification has bolstered resilience, China's exports increasingly consist of intermediate goods, indicating reliance on re-exporting hubs like Vietnam. IMF analysis reveals that China's intermediate exports to Asia-Pacific regions serve final-product exports to Western markets, raising questions about long-term sustainability. Additionally, falling export prices—driven by weak domestic demand and competition—may fuel global protectionism. The yuan's 4.6% depreciation against the euro in the first nine months enhanced price competitiveness but underscores vulnerabilities.
**Outlook** China's agile response to tariffs and manufacturing upgrades have strengthened export resilience. However, uncertainties loom, including potential tariff spillovers and geopolitical risks. IMF warns that unresolved trade tensions and supply chain disruptions pose significant threats to global growth. Amid external challenges, China must accelerate domestic reforms, fortify its economic cycle, and leverage internal stability to counter external volatility.
(Author: Global Chief Economist at BOC Securities)
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