Workers producing LED chips at a factory in Huaian, in China's eastern Jiangsu province, on 16 June 2020. (STR/AFP via Getty Images)
Trump calls US$1.2 trillion trade deficit in 2024 unsustainable, aims to rebalance global trade with tariffs
By Jennifer Ng
Analysis
As US President Donald Trump’s tariffs take effect, Singapore and ASEAN will find it increasingly difficult to rely solely on trade with China, which faces growing challenges as the “world's largest manufacturing industrial economy and exporter of goods”.
Senior Minister Lee Hsien Loong said on Dec 6 at the official opening of the upgraded Cheng San Community Club that many people were worried Singapore might enter a recession following Trump’s implementation of global tariffs on Apr 2.
“And maybe we have avoided the worst, but I have no doubt that what has happened has put us—certainly Singapore and I think many countries—in a position which is worse than we were in before 2 April.”
“And we will be in this position for a long time to come because international trade will be less certain,” SM Lee added.
China’s economic growth and wealth were largely built on its model of being “the world's largest manufacturing industrial economy and exporter of goods” to the West and beyond.
China’s trade surplus has grown nearly 44-fold since it joined the World Trade Organisation (WTO) in 2001, reaching nearly US$992.2 billion in 2024, up from US$22.5 billion in 2001.
The trade balance (exports minus imports) can reflect a country’s trade conditions. With an export-driven model that relies heavily on imported raw materials for processing and re-exporting to global markets, China has maintained a long-time trade surplus. Trade activity is also closely tied to overall demand for manufacturing. (MACROMICRO)
The US, the EU and ASEAN are China’s largest export markets.
China's largest trade surplus is with the US at US$361.1 billion in 2024, followed by the European Union (EU) at US$247.2 billion and ASEAN at US$190.7 billion.
ASEAN benefits from trade with China as the global manufacturing and export hub, importing Chinese goods and exporting them to the US.
Over the years, ASEAN has become China's largest exporter with Chinese imports reaching US$586.5 billion in 2024 while the bloc’s exports to the US, its largest exporter,
reached US$161.4 billion in 2024.
ASEAN also has the largest trade surplus with the US at US$161.4 billion in 2024.
China’s strategy as the global manufacturing and export hub has come at a cost to the West.
Trump said the US’ US$1.2 trillion trade deficit in 2024, the largest in the world, is unsustainable and pledged to rebalance the country’s global trade relations through tariffs.
He told Fox News on Oct 17 that he always had a “great relationship” with China, but added Beijing is “always looking for an edge” and has “ripped off” the US for years.
The US also raised concerns about China’s significant involvement in transshipment of its goods to the US through ASEAN, and has imposed tariffs on ASEAN nations, including additional tariffs for transshipment.
Commerce Secretary Howard Lutnick explained the transshipment of goods from Vietnam, one of the ASEAN members, during a US Senate Appropriations Committee hearing in June.
“Vietnam has $125 billion [in] exports to us, and imports from us $12.5 million. But where do they get it from? They buy $90 billion from China, then they mark it up and send it to us. It’s just a pathway for China to us.”
Trump’s tariffs on Chinese goods have curbed China’s exports to the US. In November, China’s exports to the US plunged by 28.6 percent from a year earlier, its eighth consecutive month of decline.
China’s export growth to ASEAN continued to slow to 8.2 percent in November, from 11 percent in October and 15.6 percent in September.
Despite falling exports to the US and ASEAN, China’s trade surplus for the 11 months to November rose to nearly US$1.1 trillion, surpassing the full-year total of US$992.2 billion for 2024. The decline in US’ exports was compensated through increased exports to the EU and other regions in Africa and Latin America.
China’s export growth to the EU had increased by 14.8 percent in November, a sharp rebound from 0.9 percent in October. Its September exports to the EU grew by 14.2%.
China recorded a nearly 20 percent jump in trade surplus to the EU at US$266.8 billion for the 11-month period ending November.
The EU has also warned of similar actions against China taken by the US to decouple from China’s trade.
During a visit to the country in December, French President Emmanuel Macron urged Chinese leader Xi Jinping to address China’s massive trade gap.
Macron indicated that he had discussed this issue with Ursula von der Leyen, president of the European Commission (EC).
“I told them that, if they did not respond, we, Europeans, would be forced, in the coming months, to take strong measures and to decouple, like the United States, such as customs duties on Chinese products,” Macron said in an interview with local newspaper Les Echos, published on Dec 7.
The head of the International Monetary Fund (IMF), Kristalina Georgieva, urged China to rebalance its economy away from exports toward domestic consumption, in her Opening Remarks at the 2025 China Article IV Consultation Press Conference in December.
“As the second largest economy in the world, China is simply too big to generate much growth from exports. And continuing to depend on export-led growth risks furthering global trade tensions.”
Georgieva said: “Domestic demand in China has been persistently weak, in part because the property sector is still on a shaky footing. This has depressed consumer confidence, leading to weak consumption and deflationary pressures.”
“Add to this, the challenges from slowing productivity growth, high corporate and public debt levels, decreasing returns to investment, and an ageing population. Taken together, these factors point to slower growth going forward,” she added.
International Monetary Fund Managing Director Kristalina Georgieva delivers a keynote speech ahead of the IMF/WB Spring Meetings at the organisation's headquarters in Washington on 17 April 2025. (Jim Watson /AFP via Getty Images)
Challenges to China’s Dominance as a Manufacturing and Export Hub
China faces mounting challenges to its dominance as the world’s largest manufacturing industry economy and exporter of goods, driven by Trump and the EU’s drive to bring manufacturing back to their countries.
For years, China’s leading position as the world’s largest manufacturing and export hub has been fuelled by foreign investment, but foreign investment growth in China fell to a 16-year low in 2024.
A report by the US Department of State noted that “foreign investment in China fell 27.1 percent in 2024, the sharpest decline since 2008, continuing a downward trend”.
It cited a number of reasons for the plunge in foreign investments, including “a sluggish Chinese economy, a restrictive business environment, and the Chinese government’s increasingly aggressive use of legal and regulatory tools to target foreign individuals and companies as diplomatic leverage or for crossing the Chinese Communist Party’s (CCP) political redlines”.
Since China’s entry into WTO in 2001, millions of industrial jobs in the West have vanished as cheap Chinese goods flood the markets.
Trump has campaigned on revitalising the American manufacturing sector, creating jobs in the US and making American-made products competitive globally.
According to the White House, major companies across sectors such as semiconductors, technology, AI, data centres, pharmaceuticals, biotechnology, energy, automotive and steel have pledged a total of US$9.6 trillion in US and foreign investment.
Some of the major companies include Amazon, Apple, AstraZeneca, GlobalFoundries, Google, Johnson & Johnson, Honda Motor, Hyundai, IBM, Merck, Meta, Nvidia, Nippon Steel, Pfizer, Toyota and TSMC.
SM Lee noted that China has consistently said it upholds the multilateral trading system and a rules-based order.
“You have not only got to express the right attitude, you actually got to convince people that this is how you are going to behave in real life.”
Von der Leyen said in the European Parliament in July that the CCP has restricted the EU’s access to the Chinese market while subsidising Chinese goods to flood global markets.
“These realities do present a real challenge for Europe to confront. And we have started to address these challenges—whether de-risking our economy and industry, using our new toolbox of trade defence measures, or diversifying our supply chains in sectors where China holds dependencies, if not outright monopolies,” she said.
Von der Leyen said if the EU–China partnership is to move forward, there needs to be “a genuine rebalancing: fewer market distortions, less overcapacity exported from China, and fair, reciprocal access for European businesses in China”.
The EC announced a European Chemicals Industry Action Plan, outlining concrete measures to strengthen the global competitiveness of the European chemicals industry and maintain a robust production base in critical chemicals, which are essential for defence, cleantech and digital sectors.
The EU’s chemical sector accounts for more than 96 percent of manufactured goods, but its global market share has halved since China became a major player following its entry into the WTO, according to the action plan.
As of June 30, the commission has enforced 46 measures related to chemical imports. Most of the measures “concern imports from China, likely due to a build-up of massive overcapacities”.
Diversify Trade Beyond China
Singapore must re-strategise and diversify its trade beyond China in response to the West’s reset in global trade relations.
SM Lee stressed the need to strengthen relations with neighbouring countries in his speech at the Cheng San Community Club.
“We have to make sure that within ASEAN, amongst close neighbours, our relations stay on track. Because if we go off track in a world which is already troubled, that is bad news for us,” SM Lee said.
There are encouraging signs as Singapore’s non-oil domestic exports (NODX) to Thailand has grown by double-digits to 91.1 percent in October, from an increase of 23.9 percent in September. The growth rates were 1 percent and 3.2 percent in the previous periods respectively.
Singapore non-oil domestic exports (NODX) to Taiwan has also grown by double-digits to 61.5 percent in October, up from 31.9 percent in September, as compared with an increase of 20.4 percent and 6.8 percent from a year ago respectively.
Besides Asia, Singapore has also announced plans to establish diplomatic relations with countries in other regions.
Singapore’s Prime Minister Lawrence Wong announced in April that the country will open new diplomatic missions in Africa and Latin America over the next few years.
In 2026, Singapore will open an embassy in Mexico City, its second in Latin America.
It will also open an embassy in Ethiopia's capital Addis Ababa, its third in the African continent, in 2027.
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