China’s Current Account Surplus Might Continue to Narrow in 2025

Abstract: Since the pandemic, China’s exports have been a key driver of economic growth. Since the beginning of 2024, exports have remained robust, with goods trade surpluses reaching record highs. Recently, the US Republican candidate Donald Trump announced his victory in the 60th US presidential election and is set to take office again in early 2025. During his campaign, Trump pledged a 60% tariff on all Chinese goods, which sparked widespread discussion.

The report presents three potential external demand scenarios: a no-tariff scenario, a moderate-tariff scenario, and a high-tariff scenario. In the no-tariff scenario, China maintains its export advantage, with a slight increase in export share, a decline in export prices, and a slight decrease in export growth. On the import side, domestic demand drives imports up, resulting in a modest narrowing of the trade surplus. In the moderate-tariff scenario, exports face shocks, but domestic demand is bolstered by the implementation of macroeconomic policies, which raise import growth and further reduce the trade surplus. Meanwhile, the proactive macroeconomic response largely offsets the negative impact of tariffs on economic growth. In the high-tariff scenario, US-China trade frictions lead to a contraction in both export volume and prices, while policies struggle to fully counteract the impact, resulting in a significant narrowing of the trade surplus.

In conclusion, regardless of whether the US imposes additional tariffs on China, China’s goods and services trade surplus in 2025 is expected to narrow. The higher the level of tariffs China faces, the greater the reduction in the trade surplus. Moreover, a 10%-20% tariff would have a relatively manageable impact on China’s economy, while high tariffs would pose a substantial shock to China’s economy but would likely create at least an equivalent impact on the US economy.