China has been doubling down on surplus. It is a mercantilist approach and it is hard to see as sustainable indefinitely in a world where the adjustment has to land somewhere else.
Our view is that 2026 is likely to be the year that unrest becomes more visible. Not only in advanced economies, where trade defence is already the default setting, but increasingly in emerging and developing economies too. As Chinese supply is redirected across markets under the banner of “diversification”, the politics follow. When surplus is the organising principle, pushback eventually becomes multilateral.
Over the last twelve months, China’s trade-in-goods surplus was $1.24 trillion. In Jan–Feb 2026, it increased by $45 billion compared with the same period a year earlier.
China’s surplus with the EU now averages about $1bn a day.
Note: The bars show China’s bilateral goods surplus with selected partners/regions. These surpluses do not add up to China’s global surplus because China runs offsetting deficits with other partners not shown. The % figures are each region’s share of China’s net Jan–Feb surplus (global exports minus imports).
An inspection of China’s trade with the U.S. in January-February, compared with the first two months of 2025, shows that two-way trade fell by about $15 billion. But it also suggests that China has greater immediate state capacity to compress bilateral trade on the import side. Its state-owned enterprises, which dominate key parts of the import space, can cut purchases quickly when political instructions come down. So, while China’s exports to the U.S. fell by around 11%, its imports from the U.S. plunged 27% in January-February this year.
For China, what matters is the surplus. And the net result is that its surplus with the U.S. remained basically unchanged
China’s Jan–Feb goods surplus with the EU rose from $42.1bn in 2025 to $59.8bn in 2026, up about 42% year on year.
The EU alone accounted for about 28% of China’s total surplus over the period.
Early 2026 data suggests a familiar adjustment. As the U.S. share of China’s exports falls, China appears to lean more heavily on the EU to keep overall export momentum intact.
This is consistent with our reading of the 2026–30 Five-Year Plan. Despite official rhetoric, China’s growth model still relies heavily on external demand to sustain industrial output. For the EU, it is another reminder that shifts in U.S.–China trade pressure can quickly redirect Chinese supply towards the single market.
Ahead of Eurostat’s 20 March release of January export data, here is SOAPBOX’s forecast: EU exports to China rose a mere 1.4% year on year. That would be a weak showing against the 28% jump in China’s exports to the EU in January-February combined, the nearest available benchmark given that China does not publish separate January and February figures. We will see next week how close we were.
After the U.S. Supreme Court’s recent major setback to Trump’s trade policy, the administration is moving off the emergency-powers route and onto a more solid legal lane, Section 301. This was to be expected, and we flagged it in a prior SOAPBOX issue.
Section 301 means consultations, a public record, and a factual case strong enough to justify wide-ranging trade remedies. But the direction is unchanged. Expect the tariff drive to continue, with the legal debate shifting from presidential authority to USTR’s process, scope and evidence. Neither the EU nor China is happy with the White House’s recent announcement.
At HS4 level, the EU imports more than 1,300 product categories from China. In nearly one in ten of them, China supplies more than 40% of total EU imports by value. The chart below offers our own illustrative selection from that broader universe. It highlights categories where China’s share is high and where the value of EU imports from China is also large. But size alone does not determine strategic importance. Some lower-value categories may matter more than larger consumer imports. Baby carriages, for instance, are left out, even though the EU in practice sources virtually all of them from China.
China’s surplus with Belt and Road partners rose 78% year on year in the first two months of the year, reaching $101bn, up from $57bn a year earlier.
The Belt and Road label is not just branding. In practice, participation can come with strings attached, as it often supports infrastructure, finance and market access arrangements that also make it easier for Chinese firms to sell more into partner markets, reinforcing China’s export pull.
While China’s official discourse with Africa uses language that is directionally pro-import, the substance remains China-centric. Beijing talks about “balancing” trade, yet the concrete asks focus on expanding China-linked wishes, from CIPS and RMB settlement to reinforcing Xi’s Belt and Road flagship. In the end, figures speak louder than the narrative.
The Shanghai Shipping Exchange’s China Import Crude Oil Tanker Freight Index has surged to levels not seen in recent years. This is consistent with the Iran-driven escalation around the Strait of Hormuz. The index is built from spot VLCC freight rates on benchmark routes into China, with the Middle East Gulf route carrying the heaviest weight, so any jump in war-risk premia, insurance costs, rerouting, or tighter vessel availability in the Gulf tends to show up quickly.
It should be read as a stress gauge for the cost and friction of bringing crude to China, rather than as a direct proxy for oil prices.
China projects real GDP growth of 4.5–5% for 2026, with nominal growth of around 5%. That implies an overall GDP deflator close to zero. Combined with consumer inflation of about 1–2%, it suggests planners expect producer and industrial prices to remain weak. The broad policy logic appears unchanged: keep factories running hard, avoid a serious correction in overcapacity, and rely on net exports to do much of the heavy lifting. In short, more of the same.
According to Lloyd’s List Intelligence, Chinese ports detained 28 Panama-flagged vessels between 8 and 12 March, accounting for 75.7% of all detentions in that period, far above normal levels. The report says Chinese maritime authorities gave verbal instructions to step up inspections of Panama-flagged ships, with the first week seen as a trial run before possible further escalation. Lloyd’s interpretation is that Beijing is using port state control inspections as a pressure tool after Panama forced CK Hutchison out of the Balboa and Cristóbal terminals.
The two terminals are Balboa and Cristóbal. Balboa sits within the greater Panama City metropolitan area, at the Pacific entrance to the Panama Canal, while Cristóbal lies at the canal’s Atlantic end.
China may have lost control over two strategic ports, but Beijing still appears willing to test other levers across maritime trade. In that sense, the fallout has moved beyond Panama itself.
The dispute is no longer just about ownership of two terminals, but about whether China can still impose costs after the fact through shipping and inspection pressure.