Overview
China’s November 2025 trade data show exports rebounding 5.9% year-on-year and the country’s goods trade surplus hitting about $1.08 trillion in the first 11 months of the year, an all‑time high. Yet shipments to the United States plunged nearly 29% year-on-year in November, the eighth straight month of double‑digit declines, even after an October tariff truce in which Washington cut some duties and Beijing agreed to suspend and ease expanded rare‑earth export controls.
These numbers capture the new shape of a long‑running story: a multi‑year US–China trade conflict that has morphed into a broader contest over industrial capacity, critical minerals, and technology. High tariffs from both Donald Trump’s second administration and prior Biden‑era measures are pushing supply chains to reroute through Southeast Asia, Latin America, and other regions, while China leans harder on advanced manufacturing exports and its dominance in rare earths as leverage. The October 2025 truce has paused escalation, but record surpluses, continued tariff walls, and competing industrial strategies suggest the realignment of global supply chains is still in its early stages.
Key Indicators
People Involved
Organizations Involved
The US federal government has driven the escalation and reshaping of trade ties with China since 2018, using tariffs, export controls, investment restrictions and subsidies to counter what it defines as unfair trade and security risks.
MOFCOM manages China’s trade policy, including retaliatory tariffs and export control regimes that have become key instruments in Beijing’s response to US pressure.
The WTO adjudicates trade disputes and sets baseline rules for tariffs, quotas and export restrictions.
Timeline
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Rare‑earth exports surge after truce
Economic DataChina’s rare‑earth exports jump 26.5% month-on-month in November, the second consecutive monthly rise, following the Xi–Trump agreement. Year‑to‑date exports are up 11.6% versus 2024, suggesting that the new licensing regime is beginning to restore flows even as controls remain.
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China’s November exports rebound; trade surplus tops $1 trillion
Economic DataCustoms data show Chinese exports rising 5.9% year-on-year in November after an October contraction, propelling the goods trade surplus to about $1.08 trillion for the first 11 months of 2025. Exports to the US, however, fall almost 29% year-on-year, the eighth straight month of double‑digit declines, as China pivots toward Europe, Southeast Asia, Latin America and Africa.
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China introduces general licences for rare‑earth exports
Export ControlsChina announces it is actively issuing general export licences for rare earths and magnets to large, regular buyers, speeding approvals for legitimate civilian uses while keeping a licensing framework in place. EU officials report approval rates have risen and shortages are easing, though smaller firms still struggle.
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China formally suspends new rare‑earth controls for one year
Regulatory ActionMOFCOM issues a notice confirming the suspension until November 10, 2026, of the expanded October 9 rare‑earth export controls, implementing the Busan agreement and calming some supply‑chain fears.
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Busan trade truce: tariffs cut, rare‑earth expansion paused
Trade AgreementAt a summit in Busan, South Korea, Xi Jinping and Donald Trump strike a one‑year trade deal. China agrees to suspend the planned expansion of rare‑earth export controls and issue general licences for key materials, while the US reduces average tariffs on Chinese goods from around 57% to 47% and suspends some planned hikes.
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China unveils sweeping rare‑earth controls with extraterritorial reach
Export ControlsBeijing announces expanded export controls on rare‑earth materials and technologies, for the first time extending licensing requirements to some products made outside China that use Chinese materials or know‑how, mirroring US semiconductor export bans. Industry fears a major shock to global supply chains.
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US signals 100% tariffs on some semiconductor imports
TariffsTrump announces that the US will levy 100% tariffs on semiconductor imports from countries that do not commit to manufacturing in America, a measure widely seen as aimed at China and Chinese firms such as SMIC and Huawei. The announcement deepens concerns about bifurcated tech supply chains.
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China retaliates with rare‑earth export controls
Export ControlsMOFCOM places several categories of medium and heavy rare earth elements under export restrictions, citing national security and retaliation against US tariffs. The move alarms manufacturers reliant on Chinese magnets and inputs, particularly in automotive and electronics sectors.
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Trump’s second term launches sweeping new global and China tariffs
TariffsEarly in his second term, President Trump signs executive orders imposing broad new tariffs on imports from China and many other countries, using emergency powers. Effective rates on Chinese goods reach levels above 50%, with later announcements suggesting even higher cumulative tariffs, intensifying the trade conflict.
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Biden ratchets up targeted China tariffs on EVs and clean tech
TariffsThe Biden administration announces steep new tariffs on Chinese electric vehicles (100%), solar cells (50%), certain steel and aluminum (25%), as well as future increases on semiconductors and batteries. The move frames China’s industrial overcapacity as a threat to global supply chains and to US green‑industry investments.
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US CHIPS Act signals technology‑security turn
Industrial PolicyThe US enacts the CHIPS and Science Act, providing roughly $52.7 billion in subsidies for domestic semiconductor manufacturing and research. The law, followed by export controls on advanced chips and manufacturing tools, begins to structurally pull high‑end semiconductor supply chains away from China.
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Phase One trade deal pauses escalation but leaves core tariffs
Trade AgreementPresident Trump and Vice Premier Liu He sign a Phase One trade agreement in Washington. China pledges to increase purchases of US goods by $200 billion over two years and strengthen IP protection, while the US halves some tariffs and suspends planned new ones but maintains 25% duties on about $250 billion of Chinese imports.
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US formally launches tariff war on China
TariffsThe United States imposes 25% tariffs on $34 billion of Chinese imports under Section 301, targeting goods tied to Beijing’s "Made in China 2025" strategy. China responds with equivalent duties on US goods, initiating the modern US–China trade war and prompting early supply‑chain shifts.
Scenarios
Managed truce and "China+1" persistence
Discussed by: AP, Washington Post, Financial Times, trade economists
Under this scenario, the October 2025 truce largely holds. US tariffs on Chinese goods remain elevated but not at peak levels, while China maintains a permissive general‑licence system for rare‑earth exports. Companies continue diversifying production into Southeast Asia, Mexico and other locations (the "China+1" strategy), but China retains a dominant share of many supply chains and expands in high‑value sectors like EVs, batteries and robotics. The net effect is a partial, managed decoupling in sensitive technologies, alongside continued deep interdependence in manufacturing.
Renewed escalation and bloc‑based supply chains
Discussed by: Critics of the truce, hawkish think tanks, some business lobbies
Talks could break down over enforcement—if the US deems China non‑compliant on fentanyl precursors or market access, or if Beijing tightens licences again in response to new US or allied tech controls. Trump has signaled willingness to raise tariffs to or above 100% on key imports; China has already shown its readiness to weaponize rare‑earth exports. A renewed spiral could push firms to reorient supply chains along political lines, with US‑aligned blocs and a China‑centered bloc trading more within themselves, raising costs and reducing efficiency.
EU–China trade clash becomes the main front
Discussed by: European officials, Washington Post, Reuters, FT
Europe, already running a large goods deficit with China and seeing surging Chinese auto and green‑tech imports, could move from warnings to concrete tariffs and anti‑subsidy measures. France and others have hinted at levies if China does not address imbalances, particularly in autos and clean energy. If that happens while US–China tariffs are still high, China’s export model faces pressure on two major markets, accelerating its pivot to the Global South and prompting even more aggressive pricing and state support.
Structural rebalancing: China’s surplus narrows amid domestic and external shifts
Discussed by: IMF and multilateral economists, some Chinese policy advisors
Over the medium term, China’s record surplus may prove unsustainable as trading partners push back and Beijing prioritizes domestic consumption and services. Policy moves to support household incomes, address property‑sector stress, and expand social safety nets could gradually raise imports and lower dependence on export‑led growth. Combined with friend‑shoring by major economies, this would modestly shrink China’s share of global exports and reduce external imbalances, though without returning to pre‑2010 patterns.
Historical Context
The 2018–2020 US–China Trade War and Phase One Deal
2018–2020What Happened
In 2018, the US imposed successive rounds of tariffs on Chinese imports—eventually covering about $360 billion—citing intellectual property theft and industrial policy concerns. China retaliated with tariffs on US goods, especially agriculture and autos. The confrontation disrupted global supply chains as firms shifted some production to countries like Vietnam and Mexico. A Phase One deal signed on January 15, 2020, partially de‑escalated the conflict by cutting some tariffs and committing China to buy more US goods, but left most duties and structural issues unresolved.
Outcome
Short term: Tariff escalation slowed and markets gained some clarity, but trade flows remained distorted and China fell short of its purchase commitments, partly due to COVID‑19.
Long term: The episode normalized aggressive use of tariffs and export controls in US–China relations, setting the stage for later technology and security‑driven restrictions and the current 2025 confrontation.
Why It's Relevant
Phase One illustrates how partial deals can pause but not fundamentally resolve strategic trade conflicts. The current 2025 truce may similarly offer temporary relief without eliminating the underlying drivers of decoupling.
China’s Early 2010s Rare‑Earth Export Restrictions and WTO Defeat
2010–2015What Happened
In the early 2010s, China restricted exports of rare earths, tungsten and molybdenum through quotas, export taxes and licensing, arguing it needed to conserve resources and protect the environment. Import‑dependent countries, led by the US, EU and Japan, challenged these measures at the WTO. In 2014, a WTO panel and Appellate Body found that China’s export restrictions violated its commitments and were not justified by conservation exceptions, leading Beijing to scrap formal quotas by 2015.
Outcome
Short term: Export constraints caused price spikes and supply uncertainty, prompting some manufacturers to seek alternative materials and suppliers outside China.
Long term: The ruling limited China’s ability to use quotas and taxes on rare earths within the WTO framework, but Beijing later shifted toward more complex licensing and security‑based controls—an approach now seen in the 2025 export control regime.
Why It's Relevant
This precedent shows both the power and limits of multilateral trade rules. Today’s rare‑earth controls are crafted to avoid simple quota structures, making them harder to challenge, even as they again become leverage in US–China trade disputes.
1980s US–Japan Trade Tensions Over Autos and Semiconductors
1981–1987What Happened
Facing a surge of Japanese cars and electronics, the US negotiated voluntary export restraints on autos and later imposed 100% retaliatory tariffs on selected Japanese electronics over alleged semiconductor dumping and market‑access failures. These disputes revolved around fears that Japan’s industrial model and export strength were hollowing out US manufacturing.
Outcome
Short term: US measures temporarily reduced Japanese imports in targeted sectors and pushed Japanese firms to expand production inside the US, but also raised costs for consumers and strained bilateral relations.
Long term: Japan eventually shifted toward more investment in the US and other markets, while the US and Japan negotiated arrangements that stabilized trade ties. However, the episode left a template for using selective tariffs and quotas against successful exporters.
Why It's Relevant
The US–Japan experience foreshadows current conflicts over Chinese autos, EVs and semiconductors. It suggests that high tariffs can drive foreign producers to localize manufacturing and adjust but rarely reverse deeper competitiveness trends, offering clues to how today’s China‑focused measures may play out.