New trade data from the world’s two largest economies paints a fascinating picture this morning, with China recording an unprecedented US$1.2tn trade surplus last year and the US seeing its own deficit narrow on the back of raised revenues from tariffs.
However, an imminent ruling from the Supreme Court on the legality of Trump’s tariff policies could have seismic consequences, with the US president saying there would be a “complete mess” if they are found to be illegal.
China’s posts record trade surplus
China’s customs authority yesterday reported that its full year trade surplus for 2025 reached a record $1.2trn, meaning its exports outstripped its imports by over a trillion dollars.
This included a 6.6% increase in exports in December, outpacing expectations from economists. The country’s steel exports also surged to record levels, reports Bloomberg, despite protectionist measures being introduced by various parties including the US and EU.
The record figures come despite the escalating tariff war between China and the US, though there are signs in the data that a decoupling of the superpowers is underway, with the US share of Chinese exports down from 14.7% in 2024 to 11.1% last year.
It is the EU, however, that may be most irked by yesterday’s figures, according to the FT. Chinese exports to the bloc rose 8.4%, while sales to southeast Asia also increased by 13.4%.
Wang Jun, vice minister of the General Administration of Customs of China, is quoted by the FT as saying that the record surplus is partly due to controls placed by countries, including the US, on Chinese imports of high-tech products and semiconductors.
“It should be pointed out that some countries politicise economic and trade issues, using various pretexts to restrict exports of high-tech products to China; otherwise, we would import more.”
US trade deficit shrinks
The US posted its own figures yesterday and saw its trade deficit shrink to $1.7trn. This is in large part due to the increased tariffs introduced on imports into the country by President Trump last year.
However, Bloomberg reports that Trump’s recent tax cuts for corporations could start to cut into boosted government income from tariffs, with corporate tax receipts down 28% year on year for the month of December. Individual tax receipts are due to be filed this month, which will further indicate to what extent tax reforms under the ‘One Big Beautiful Bill Act’ could counter any gains from tariffs.
There is also uncertainty about the extent to which tariffs will continue to be a revenue generator for the US, and even questions about whether the Trump administration may have to pay back raised income from last year’s duty hikes, with the Supreme Court imminently due to announce its ruling on their legality.
Trump posted on social media to say that there would be a “complete mess” if the court ruled that the US would have to pay business back for the tariffs.
"It would take many years to figure out what number we are talking about and even, who, when, and where, to pay," Trump said. He also posted on Monday that "WE'RE SCREWED" if the court rules against the tariffs.
In a visit to Detroit yesterday, he called the US trade agreement with Mexico and Canada secured during his first term “irrelevant”.
Global resilience despite uncertainty
Despite the volatility that has emerged in international trade since Trump’s introduction of tariffs last year, the World Bank reports that the global economy will “remain broadly steady over the next two years”, with growth of 2.6% in 2026 and 2.7% in 2027.
There was better-than-expected growth in the US in particular, which accounted for two-thirds of an improvement in this month’s forecast for 2026 compared to the previous prediction in June 2025.
Nonetheless, the 2020s are “on track to be the weakest decade for global growth since the 1960s” contributing to a widening gap in global living standards.
UK to go ‘toe-to-toe’ with US on growth
The World Bank’s report comes ahead of next week’s meeting of global business and political leaders in Davos for the World Economic Forum’s annual conference.
Peter Kyle, the UK business and trade secretary, is today addressing business leaders in London at a pre-Davos reception hosted by Bloomberg, where he is expected to lay out the government’s Modern Industrial Strategy.
A government preview of his speech indicates he will say that the UK is bidding to match the US on economic growth.
“We stood on a manifesto commitment to be the fastest growing economy in the G7. And we absolutely meant it,” he is expected to say.
“Now, in the first three quarters of last year, the UK achieved the second highest growth of that group. That is cause for optimism.
“But contrast it to the United States. The US achieved 4.3% growth over the last quarter.
“I want to fight tooth and nail with you to get that extra growth. To compete with America.”
The government is putting its ongoing reset of trade relations with the EU at the heart of its missions to achieve this growth, and the city minister, Lucy Rigby, today told the FT that enhanced cooperation on financial services will be part of this.
Labour has also announced a fresh wave of funding for transport infrastructure in the north, with a £45bn revival package for the ‘Northern Powerhouse’ project.
Also today in trade
- The BBC has assessed which countries will be most affected by new US tariffs for countries still trading with Iran
- The Times reports that the UK could use oil seized from ‘shadow fleet’ tankers to fund the Ukraine war effort
- Nigeria and the United Arab Emirates have signed a new trade deal that eliminates tariffs on more than 13,500 products, according to Nigerian website Business Day
- £200,000 of funding has been made available for businesses around Teesside via the Tees Valley Export Fund
Yesterday in trade
- The Chartered Institute published the second edition of its guide on the ‘Three pillars of customs compliance’ and hosted a free webinar to mark the occasion
- Business and Trade Committee chair Liam Byrne called for the UK to pursue an ‘economic security union’ with EU to mitigate China risks
- There has been a ‘deterioration’ in intra-EU trade, according to new analysis from Brussels
You can read yesterday’s trade news digest here.
