The “Liberation Day” tariffs of April 2, 2025, were the best example of President Trump’s economic nationalism—the concept that nations should prioritize their own industries and workforce over global trade, using protectionist policies when necessary.
Trump was particularly harsh toward China, slapping the country with various tariffs of up to 50% (until they were ruled illegal by the U.S. Supreme Court).
But none of that appears to have held China back. The United States’ biggest economic rival leads the pack when it comes to exports, which are continuing to grow, while its imports continue to pull back. Those exports are so cheap and ubiquitous that they’re reducing inflation in some developed markets, according to Goldman Sachs.
According to data from the Chinese government, even U.S. imports from China are on the rise—suggesting that the trade war did not wean American households off cheaper Chinese goods.
In June, the General Administration of Customs for the People’s Republic of China reported that it had exported goods and services worth $43 billion to the U.S., and nearly $216 billion for the year to date. Conversely, it reported imports of $14.6 billion in July: The trade balance, already heavily weighted to China’s benefit, saw exports to the U.S. rise 0.2% year on year, and imports drop 0.8%.
It appears the new levies between the global powers have changed the behavior of Chinese consumers and businesses far more than they have American.
The U.S. government data tells a different—and possibly misleading—story. Census Bureau data show that the U.S. has imported only $104 billion so far this calendar year, averaging about $20 billion per month. The discrepancy is “not because ships are sinking mid-Pacific,” UBS’s Paul Donovan highlighted Friday. “This level of distortion is unique to Sino-U.S. trade. If imports from China are not identified as coming from China, the importer may pay a lower (or no) tax.”
Donovan describes the discrepancy as “evidence that tariffs are being avoided.”
Regardless of the differences between the U.S. and Chinese numbers, Goldman Sachs wrote in a note over the weekend that Chinese exports to the rest of the world are now so significant they’re helping keep the price of living lower in developed markets.
“Chinese exporters to non-U.S. [developed markets (DMs)] have grown rapidly since the pandemic,” Megan Peters wrote in a note over the weekend, highlighting some of this strength derives from reallocation from the U.S. Peters adds: “At the same time, Chinese imports from the rest of the world have pulled back amid an increased push for self-sufficiency.”
Makeup and skincare imports, for example, have fallen by approximately 55% since 2023, while automotive imports have fallen by approximately the same levels since mid-2023, the data compiled by Goldman Sachs shows.
Clothing and accessories, and medical and pharmaceutical products, have also fallen by more than 20% compared to the pre-pandemic trend.
The inflation boon
In his Liberation Day tariff speech, President Trump said that foreign nations had subsidized their exports to undercut U.S. pricing, and that the U.S. had been “looted, pillaged, raped, and plundered by nations near and far, both friend and foe alike” as a result.
But developed markets outside the U.S. have actually benefited from the cheaper goods during a period of sticky inflation. Using a cross-country trade-inflation panel, Peters writes that for every 1 percentage point increase in Chinese exports to a country since 2024, there is a 0.5% decline in goods prices. On average, the trade link has lowered goods prices by 0.6% in non-U.S. developed markets so far.
But Trump’s trade war means the U.S. won’t be one of the beneficiaries from the longer-term disinflationary measures of importing from China.
Of course, any perceived inflation benefit of importing must be offset by the fact that domestic producers are potentially being undercut, making their businesses less prosperous.
Peters writes: “We have previously argued that increased goods supply from China should exert a meaningful disinflationary impulse across [developed markets], especially in Europe … We expect these effects to continue to build going forward, both because the impacts of realized trade shifts may not yet be fully reflected in consumer prices, and because our China economics team expects the current account surplus will continue to widen.”
“Although the main driver of our relatively benign inflation outlook is that domestic supply and demand broadly appear in balance, these Chinese trade dynamics are another reason why inflation will likely return to near-target levels [set by central banks] in major DMs in the upcoming years.”