Keeping it Simple with Simplify Asset Management Keeping it Simple | Ep. 48: The Forbidden Question — What’s Going on With China’s Trade Surplus?
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May 6, 2025 
Brad Setser, a renowned economist and Senior Fellow at the Council on Foreign Relations, joins the conversation to unpack China’s trade surplus. They dive into how the pandemic reshaped China’s economy, transitioning from property to manufacturing, especially in electric vehicles. Setser examines U.S.-China trade dynamics, the impact of tariffs, and shifting financial strategies. The discussion also touches on China's strategic economic maneuvers under Xi Jinping and the broader implications for global markets, making for a thought-provoking dialogue.
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China Dominates Global Trade Surplus
- China's trade surplus has increasingly dominated global goods trade, largely replacing other countries as surplus sources.
- The US trade deficit is primarily explained through its bilateral strains with China, creating a two-party dynamic.
Misguided US Tariff Strategy
- The US administration's approach targeting allies like Canada and Europe before China was counterproductive.
- This strategy lacked clear objectives and led to tariffs on countries with balanced trade, causing unnecessary conflict.
Path Forward for Tariffs
- The initial Trump tariffs were more targeted and modest compared to later broad tariffs against many countries.
- A more manageable path forward likely involves a moderate universal tariff, with higher but sustainable tariffs on China.