China’s Trade Surplus, Part III
Paul Krugman | Substack • • business
Key Points:
- China’s massive trade surplus, reaching approximately $1.2 trillion in 2025, poses significant challenges to the global economy, particularly for the United States and Europe, due to its size relative to world GDP and its disruptive effects.
- The surplus has caused major economic and social disruptions in importing countries, including significant job losses in specific communities, and raises national security concerns by giving China control over critical supply chain chokepoints.
- There is a risk that China could lock in long-term dominance in future industries, such as solar panels and electric vehicles, which could have strategic and economic implications for other nations.
- While free trade is generally beneficial, exceptions exist where government intervention via industrial policy is justified, especially to protect industries vital
