China's $1 Trillion Surplus, Nvidia Win Brings Trump Tariff Policy Near Collapse

With $12 billion in bailout payments to U.S. farmers, Nvidia  (NVDA)  at the front of the line for approval to sell high-end chips to China and companies starting to form a separate queue to demand tariff refunds, U.S. President Donald Trump’s fundamentally flawed tariff policy is dangerously close to collapse.

It is already proving an expensive mistake. The Trump administration is rolling out a rescue package for U.S. farmers whose businesses have been hurt by trade tensions, none more so than soybean farmers, after China retaliated against U.S. tariffs by suspending all purchases of the crop.

U.S. crop producers have taken a hit to the tune of $43 billion in losses due to lost exports and depressed prices, according to a research team at North Dakota State University. That includes $20 billion in damages for corn; $10 billion for soybeans; $8.5 billion for wheat; and a combined $6 billion for other crops such as peanuts and cotton.

China’s Surplus Higher Than Ever

The aim of Trump’s trade policy was, initially, to rebalance trade with China. But new numbers show China is exporting more goods than ever.

China’s worldwide trade surplus in goods topped $1.08 trillion through November, according to numbers released this week from the Chinese customs agency. The world’s second-largest economy came close to breaking the $1 trillion surplus barrier last year, with a then-record surplus of $990 billion. But it has swept past that threshold in just 11 months of 2025.

November’s trade surplus for China, at $111.7 billion, was the third-largest month on record. It was also up 21.7% compared with the same time last year.

Trump started his tariff crusade with the stated aim of rebalancing U.S. trade with China, but his trade policy quickly morphed to include a mishmash of goals: to re-shore industry; to collect import taxes; to combat the illegal trade in fentanyl; and to punish countries such as Brazil for, in Trump’s eyes, mistreating Trump allies such as former Brazilian president Jair Bolsonaro.

U.S. consumers are also paying a price. Inflation has risen back to 3.0%, the same level as at the start of this year, and up from 2.3% in April. Higher prices are highly unpopular heading into the holidays, and are partly to blame for the poor Republican showing in recent elections. Hence the Trump administration walking back its toughest trade talk.

Redirected China Trade

Faced with difficulties exporting into the United States, Chinese companies have adapted U.S. shipment strategies in an attempt to control the higher import duties. But they have also shifted the final step in the production line to other countries, particularly Southeast Asia, to avoid the higher import taxes on China-produced goods.

For November, Chinese shipments into the United States fell 29% year on year. But they rose 14.8% into Europe and 8.2% into Southeast Asia for the same timeframe.

We can see, in separate data from Wells Fargo Supply Chain Finance, that U.S. imports from China are down 26% from last year’s levels, while trade volumes from Vietnam, Thailand and Indonesia into the United States have surged. And yes, China’s exports into Southeast Asian nations have risen sharply at the same time.

In fact, China’s exports are so large that they are once more proving a top concern for China’s top leadership. The Politburo, China’s equivalent of a cabinet of ministers, issued a statement based on its meeting on Monday, and ahead of the annual Central Economic Work Conference, due to take place from December 11 to 12, that will set the agenda for 2026.

China’s Growth Target Likely to Remain for 2026

As Nomura’s China economics team noted, the statement reintroduced terms such as the need for “counter-cyclical” policy adjustment, language absent from the statement after the last meeting in July, and signaling concerns about downward pressures on China’s economy.

“This appears to have confirmed our once-contrarian view of a demand plunge” in the second half of the year, the Nomura team wrote in a note to clients. “Cross-cyclical” policy was also reintroduced as a term, noting the increased concern China’s leaders have surrounding the domestic economy.

The Politburo note the need for “proactive fiscal policy” and “appropriately loose monetary policy” as ways to boost domestic demand. Chinese Premier Li Qiang says China is confident it can hit its goal of growth at “around 5.0%” for this year, and economists anticipate it will likely forecast growth at the same rate for 2026.

The 2026 growth forecast for China’s economy will be set at the economic work conference, but will only be disclosed at the annual sessions of China’s parliament in March.

While the Politburo does warn of the impact of trade disruption, China can generally count its response to Trump’s provocations as a success. The soybean ban, eased slightly starting last month, and restrictions on rare-earth shipments to the United States have solicited a temporary cease fire in the U.S.-China trade war, with the worst tariffs suspended, although U.S. taxes on Chinese goods remain at 20%, double the level at the start of the year.

Nvidia Sets Precedent for Other Chip Producers

Trump looked to ease tensions with China further on Monday evening, with a social media post stating he had informed Chinese President Xi Jinping that his administration will now allow Nvidia to ship H200 chips into China. Those are Nvidia’s second-fastest chips.

The post said that the “same approach will apply” to Advanced Micro Devices  (AMD) , Intel  (INTC)  and “other GREAT American Companies.”

This policy rolls back, of course, a Biden-era policy to curb the shipment of high-end U.S.-made or -designed chips into China. Trump says the U.S. government will receive 25% of the proceeds of Nvidia chip sales, conflating trade policy and national-security interests with commercial success.

Democratic senators Elizabeth Warren and Andy Kim wrote last week to U.S. Commerce Secretary Howard Lutnick to lament this conflict of interest. Approving such sales “risks powering the PRC’s (People’s Republic of China) surveillance, censorship, and military applications,” the duo wrote. They urged the administration “to stop ignoring the input of bipartisan members of Congress and your own experts in order to cut deals that trade away America’s national security.”

Watch Consumer Stocks on Tariff Ruling

The U.S. Supreme Court is due to rule on the Trump administration’s use of the International Emergency Economic Powers Act to justify many of the Trump tariffs. That law, which doesn’t mention tariffs, allows the president to act to protect U.S. national security in face of an emergency such as war.

In hearings, the Supreme Court’s justices appeared skeptical of Trump team arguments that tariffs are not taxes, which Congress must administer. They also questioned whether trade negotiations are really in an “emergency” state with, essentially, every nation on earth, including allies such as France, and even uninhabited Antarctic islands.

Ahead of the Supreme Court decision, U.S. companies are lining up to demand tariff refunds. Bulk retailer Costco Wholesale  (COST)  is one of the most high-profile to do so. But the list of lawsuits demanding refunds also includes cosmetics company Revlon Consumer Products, the Ray-Ban maker EssilorLuxottica, motorcycle maker Kawasaki (T:7012), and the Taiwan-owned tuna tinner Bumble Bee Foods.

We can watch the stocks of many U.S. retailers for gains as we approach the Supreme Court decision, although the justices did voice concern about the difficulty walking back the tariffs already imposed.

Trade Secretary Lutnick said the companies looking for refunds should think again. 

“It’s not going to happen,” Lutnick said on CNBC. “I am confident it’s not going to happen, and we will have tariffs no matter what, going forward.”

We shall see… 

At the time of publication, McMillan was long NVDA.