Author: Hsien-Ming Lien, President of the Chung-Hua Institution for Economic Research
One year into Trump’s term, The New York Times’ annual review paints a grim picture. While inflation has declined, the decrease remains limited, and unemployment has actually risen. Public satisfaction has fallen, with approval ratings dropping below 40%. Immigrants and minority groups have borne the deepest impact, with virtually no notable policy achievements. The Economist has also noted that in the long-term U.S.-China confrontation, China has actually gained the upper hand, largely as a result of Trump’s policies.
The most frequently cited evidence is that even amid the U.S.-China trade war, China’s trade surplus in 2025 still reached approximately U.S.$1.2 trillion, demonstrating that Trump’s tariff policies have had a limited impact on China. From an outcome perspective, China’s manufacturing capabilities are indeed formidable, with foreign merchandise trade value still growing by over 5%. Despite a 20% drop in trade with the U.S., China’s exports to ASEAN nations increased by 13%, grew by 8.4% to the European Union, rose by 7.4% to Latin America, and surged by 26% to Africa. In other words, tariffs did reduce China’s trade surplus with the U.S., but other countries have replaced the U.S. as new sources of China’s trade surplus. These foreign trade surpluses also contributed approximately 1.5% to China’s economic growth rate in 2025.
Why, then, does Trump continue to insist on tariff-based trade policies? Examining the trade policy announced by the White House, its core consists of only two key terms: national security and supply chain resilience. The comparative advantage most frequently emphasized in traditional international trade, allowing consumers to purchase goods at lower prices, is not a priority for the Trump administration. This shift in trade policy has two primary causes.
The first is the unemployment problem. China’s unique industrial structure and policies enable many products to be produced at costs that are difficult to compete with. According to traditional economic theory, even if China subsidizes exports, other countries can still benefit by importing cheap goods. But in reality, this impacts domestic industries and employment.
Taking Taiwan’s most competitive semiconductor industry as an example, mature process products often cost 20% more than those from China. If imports were completely liberalized, this would severely damage related industries and workers, subsequently affecting social stability. This also explains why MAGA supporters remain Trump’s most loyal followers.
The second reason is China’s weaponization of trade. China holds dominant market shares in industries including solar energy, wind power, lithium batteries, and electric vehicles, and frequently uses trade as a negotiating tool. During COVID, China restricted exports of masks and gloves, while Japan has recently faced pressure due to Chinese tourism restrictions. Over the past year, China has increasingly used rare earth exports as a trade negotiation instrument. Confronting these tactics, the U.S. is working with allies to rebuild domestic manufacturing and strategic industries, strengthen supply chain autonomy, and avoid excessive dependence on China.
However, even though China has successfully diversified its exports to the European Union, Africa, and Southeast Asia in 2025, these countries will face the same problems encountered by the U.S. sooner or later. Setting aside supply chain risks, the political dilemma remains whether to accept domestic unemployment for the sake of cheaper imports. If Chinese goods merely replace imports from other countries with a relatively limited impact, countries may permit them tacitly. However, if domestic industries are displaced, political backlash will inevitably become intense. This is precisely why MAGA supporters remain steadfastly loyal to Trump. In other words, whether China can continue to rely on substantial foreign trade surpluses to compensate for insufficient domestic demand while simultaneously avoiding backlash from major trading partners will be one of the most noteworthy global economic focal points in 2026.
Original source: Hsien-Ming Lien (January 28, 2026). Economic Thinking – Trump’s 2025: From Economic Efficiency to Economic Security. China Times. https://www.chinatimes.com/newspapers/20260128000222-260210