Hallelujah. The IMF has recognized that China's weak real exchange rate is a problem, and that it has contributed to China's export surplus and growing trade tensions. From @KeithBradsher in the NYT

1/ The IMF has lagged on this issue, not led ... and it still isn't quite calling for a nominal appreciation (though Georgieva may have hinted at the need for nominal appreciation to offset inflation differentials). The EU Chamber is more explicit (from the FT)

2/

Brutal -- but accurate -- assessment of the results of Trump's year one policies by @wsj_douglasj and @JonathanEmont of the WSJ

1/ "Strip out imports of energy, food and raw materials, and China is on track this year to post a surplus in manufactured goods of around $2 trillion, a huge sum that is on a par with the annual national income of Russia or Italy" 2/

Powerful article from @greg_ip

"China is now the world’s ... largest exporter, but ... It has never believed in balanced trade nor comparative advantage. Even as it imported critical technology from the West, its long-term goal was always self-sufficiency

Nice chart too

1/ Very much agree with his overall thesis, and with his policy prescription

2/

One feature of today's global economy: the incredible concentration of the global goods surplus in East Asia (using customs data). Way more so than in Trump one

1/ Implicit in the chart is the observation that the rest of oil-importing East Asia has maintained its goods surplus even as China's surplus has soared (helped by demand for Korean and Taiwanese chips)

2/

I will disagree with Scott on this -- there shouldn't be any debate about whether a stronger CNY is doable ...

Right now the CNY basically follows the fix; a stronger fix = a stronger yuan

1/

https://twitter.com/KennedyCSIS/status/1994447087212130765

FX settlement data clearly shows appreciation pressure (with intervention at the fix not at the strong side of the band)

2/

I am (obviously) a part of the "East Coast" think tank establishment Mr. Balding criticizes, & also served in the Biden Administration. But I would encourage Mr. Balding to read some of the work that I and my colleagues have done, as he paints with far too broad a brush

1/

https://twitter.com/BaldingsWorld/status/1992755045603873100

I would be the first to say that not enough was/ is being done on active pharmaceutical ingredients. But inside and outside of government I advocated for the 301 tariffs to be extended to rare earths/ magnets ... which was in the end done as part of the 301 review

2/

The Treasury International Capital Data for September is now out -- China's Treasury holdings were constant during the data that was missed during the shutdown. Japan is up. UK and France are down a bit -- with a rise in the smaller EU custodial centers

1/ The runup in foreign holdings of Treasuries has all been "private" -- tho note that funds that China holds in private custodians in Europe register as private, so the split is imprecise

2/

Crazy current account numbers for Taiwan in q3 -- a 20% quarterly surplus, and q4 looks like it will be bigger. That pushed the trailing 4q surplus up to 16% of GDP -- a record.

(and yet the TWD is weak, after hefty intervention in q3 changed the BoP dynamics)

1/ Taiwan's soaring surplus though hasn't translated into soaring demand for bonds in the last 4 quarters -- bond purchases picked up in q3, but no longer are on the scale needed to match the huge current account surplus

2/

A big new report from @AidData sheds insight into one of the mysteries of global capital flows, namely how does China's large/ growing current account surplus fund the US external deficit. The answer, in part, is lending by the state banks

1/ The disaggregated data shows that China isn't just funding publicly guaranteed infrastructure projects in frontier economies/ Africa. Its state banks also do a lot of lending to "private" firms, including loans that back Chinese firms going out

2/

The Economist takes a look at Taiwan this week -- and its peculiar combination of a weak currency and a massive external surplus;

"[Taiwan has] the world’s most undervalued currency and one of its biggest trade surpluses."

1/

economist.com/briefing/2025/… The explanation for Taiwan's exceptionally weak currency (on the big Mac index & pretty much any other indicator) is Taiwan's central bank "as Taiwan has exported its way to prosperity, the CBC has tried to avoid such a fate by suppressing the value of the local currency"

2/

Data on domestic sales is clearly off --

https://twitter.com/Eivor_Koy/status/1988524325474082996

And China's net auto exports far exceed the 1.3 m cars Germany exported on net in 24 ...

The old exportweltmeister has been dethroned -- and its economy is suffering at the hand of the new exportweltmeister (China).

That is the story told by both a new ECB paper and the FT in an excellent new piece

1/ Put simply, Germany is the most exposed large G-7 economy to the second China shock (Japan has been buffered by an incredibly weak yen).

2/

Germany needs to fully wake up (it is happening but too slowly)

China's auto export growth did not slow in October.

825K vehicle exports (an annualized pace of close to 10m), likely over 700K passenger car exports (8.5m annualized). Crazy numbers

1/ Overall export growth slowed in October, but auto exports were surprisingly strong (2024 forecasts that China's export book was set to fizzle out haven't been born out, export growth actually reaccelerated)

The vehicle surplus now exceeds $100b

2/

The first relatively weak Chinese trade data release in a while -- October is usually down v September, but y/y growth in exports and imports also stalled. If October is a leading indicator for q4, the goods surplus will stabilize at (gulp) around $1.2 trillion

1/ There is a standard seasonal fall in export in October tied to the mid-autumn festival -- and that dip may be a bit pronounced this October. But y/y volume growth looks close to flat (after a surprisingly strong 11-12% increase in Sept)

2/

Somehow, the US has ended up with a tariff structure for many goods that doesn't really encourage a shift in production out of China. Quote is from Sean Stein of the US-China Business Council, in a new piece from @AnaSwanson To be sure, the legacy 25% 301 tariff on lists 1-3 does discourage final assembly of those goods in China -- but the term 2 tariffs haven't added to that penalty ...

2/

nytimes.com/2025/11/02/bus…

Jason Douglass and Jonathan Cheng in the WSJ -- the Trade War Didn't Change China.

In fact, China's economy is more unbalanced and more reliant on exports for the demand than it was when section 301 case first started

1/ Open trade failed, spectacularly, to liberalize China's political system.

More restricted trade if anything led China to double down on its manufacturing intensive, channel capital to industry model

2/

China's goods and services data on a balance of payments basis is now effectively out for q3 (with the September monthly data) -- and on a balance of payments basis, exports jumped up a bit in q3

1/ The q2 surplus using China's (whacky) BoP methodology was well below the q2 customs surplus -- but the q3 BoP surplus is strong, and up v q2 (while the customs surplus is down)

2/

There needs to be a better consensus number for the tariff on China. The effective tariff rate (Tariff paid/ imports) was 37-38% in July and August. It should fall to under 30% with the recent deal.

1/

https://twitter.com/JChengWSJ/status/1984083492523929881

As @EtraAlex notes, that is still higher than the effective tariff rate on most other countries (India is a bit of an outlier, but there should be a deal) -- the electronics exclusion lowers the effective tariff on SE Asia ...

2/

China's currency is objectively very weak, especially in inflation adjusted terms (it is down just under 20% from its 2021 high). And it is very tightly managed against the dollar --

But within that broad regime, there has been a tiny bit of appreciation over the last 6ms

1/ many And to be sure, the movement is primarily against the dollar -- the yuan remains incredibly weak against the euro (contributing to the second China shock, China's rising share of the EU auto market & German automotive angst)

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China, the unexpected "winner" from Trump's second term trade war?

Bringing the Trump 2 tariff on China down to 20% (10% reciprocal, 10% fentanyl) is a huge win for China; it puts the new tariffs at the same level as the new tariffs on SE Asia

1/ The new tariffs on China would also only be 5 pp higher than the tariffs on US allies like Japan and Korea (and most European countries) ... massive shift away from the campaign proposal

2/

wsj.com/world/china/tr…

Excellent piece by @AnaSwanson on the now expected Trump-Xi trade deal/ truce/ US walk back

Agree with Mr. Czin. The most remarkable thing about the current US trade agenda with China is all the things that aren't on it. I would include currency on that list of course

1/ The best argument for the limited US agenda is that the US lacks the leverage to get China to fundamentally change, so the best the US can hope for is selling some beans and getting export licenses for rare earths

2/

nytimes.com/2025/10/27/us/…