China's cumulative trade surplus through August reached $805.5 billion
China’s trade surplus grew from July’s trade surplus of $112.5 billion
Latest data puts China on pace to exceed $1 trillion for the second consecutive year.
U.S. trade deficit for July grew to $99.3 billion
The global trade war is about to heat up.
The accelerants to this firestorm: strong trade data from China, the ratcheting up of the U.S. trade war with Canada, and the growing U.S. trade deficit.
Buckle up for trade threats, boycotts, and more trade tension.
The trade war with Canada escalated this morning as Canada’s retaliatory tariffs on about $20B in U.S. goods took effect.
The stealth tariff attack is hitting the majority of U.S. States.
Ahead of the tariff deadline, Trump renewed his January push to decertify all aircraft built in Canada and impose a 50% tariff on aircraft sold to the U.S.
Trade tariffs via social media are not official, but the threat quickly drew a response not only from the Canadian planemaker but also from Senator Jerry Moran (R-KS).
Kansas is one of the key states, along with Texas, Arizona, Connecticut, Illinois, Delaware, California, Washington, D.C., and New Jersey, that have workers in Bombardier facilities. Remember, trade takes people and injects wealth into a state or country’s economy.
In addition to this potential boycott, the Trump post also mentioned Canadian dairy and alcohol. Dairy has long been a point of dispute between the U.S. and Canada.
US dairy exports to Canada during the first half of 2026 were down 4% (valued at $652.5 million) versus the first half of 2025, while US dairy imports from Canada were up 9% (valued at $235.2 million), the same timeframe.
The National Milk Producers Federation (NMPF) and US Dairy Export Council (USDEC) have praised the Trump administration for supporting fair and balanced dairy trade.
Supporting farmers has been a major mission for the Trump Administration. Yes, you can argue about the impact of tariffs and fertilizer on the agriculture industry, but that’s for another day.
According to the Spirits Canada Trade group, about 93% of all Canadian spirits exports ship to the United States. U.S. imports of Canadian spirits and liqueurs account for roughly $680 million to $690 million per year
Remember, Section 338, the tariff act used in this trade with Canada, has no statutory time limit, requires no congressional consultation before action, and no report afterward.
What Trade Deficit is Telling Us
The global trade war fueled an earlier peak season, with U.S. companies pulling forward millions of containers ahead of the traditional time horizon to get their products in before the latest tranche of tariffs.
The enormous volume of containers boosted the logistics and warehousing industries. But when you review the products’ manufacturing origins, you will see the trade war
Contributing to the United States’ deficit, exports from South Korea, Taiwan, and Vietnam related to data centers and electronics.
This contrasts with China, where semiconductor exports more than doubled from a year earlier to $40.7 billion in August.
Recent U.S. Commerce Department data revealed a $99.3 billion U.S. goods trade deficit with 13 key Asia-Pacific economies in July.
Vietnam, a beneficiary of the China plus 1 strategy, was the largest contributor to the deficit with an historic high of $24.8 billion. Vietnam is the U.S.’s top trading partner. Imports from Vietnam rose 5% to $26.4 billion in July. That was up 5% from the previous month.
The continued strength of Vietnam’s imports flies in the face of the tariffs and the bluster of tariff talks. Containers don’t lie and reveal the truth of the trade reality.
The last Trump social post on Vietnam trade was April 4, 2025. At that time, President Trump said he had a productive call with To Lam, General Secretary of the Communist Party of Vietnam.
The country has kept its promise to buy more U.S. agricultural commodities under its October 2025 MOU on Reciprocal, Fair, and Balanced Trade with the U.S.
But the widening trade deficit shows how Vietnam is a critical hub for the global supply chain. This will anger Trump.
President Trump will eventually acknowledge this widening deficit. He normally does. It may not be immediate, but don’t assume the silence guarantees a pass.
Right now, there is public discussion of one of the most significant trade and customs issues: the origin of a product being manufactured and how it is reported. This is how China has been able to evade tariffs.
It works like this: Chinese-made products are exported unassembled to another country, say, Mexico, and assembled at a Mexican facility, or modified in some way. That product would be transformed from an unassembled pile of parts into a new product and be categorized under a different Customs code. The product’s origin would then be labeled “Made in Mexico.” This was a big loophole in the USMCA negotiated by President Trump’s first administration.
If this rule becomes official, it will impact how U.S. shippers file their Customs reports. They will need to know the origin of their products’ materials. Supply chain visibility is a challenge for some companies. If this rule goes through, companies will need better supply chain tier knowledge.
This sweeping Advance Notice of Proposed Rulemaking (ANPRM), titled Heightened Import Disclosures for Supply Chain Visibility, was issued in response to Executive Order 14411, “Strengthening Customs Enforcement.”
The ANPRM seeks public comment on this measure that would enhance customs enforcement and improve CBP’s ability to detect illicit importations, including goods that may be illegally transshipped to evade U.S. customs and trade laws.
This rule will affect the expansion of China’s supply chain and manufacturing.
Imports from China have decreased since Trump was re-elected, but the front-loading data shows the U.S. imported $27 billion of goods from China in July. This expanded the deficit by 7.6%.
The U.S./China trade deficit has widened every month since Trump’s meeting with Chinese President Xi Jinping in May. Xi is expected to meet with Trump at the White House on September 24.
U.S. Trade Deficit
The overall U.S. goods and services deficit with all trading partners has grown to a 16-month high of $88.6 billion in July, up 24.4% on the month.
The most common chart used to illustrate the total U.S. trade deficit is the Federal Reserve Economic Data (FRED) series BOPGSTB.
Energy exports are a major counterweight to the broader U.S. trade deficit.
U.S. energy exports to the world have soared after the start of the Iran war and have dropped since May.
But what’s brewing energy-wise and not on the radar of the media is the looming price of heating American homes this winter. As I mentioned in my last post, Andy Lipow is ahead of the game, flagging this.
We are 193 days into the U.S. /Israel war with Iran. It has been 1 year, 5 months, and six days since the start of the global trade war with the announcement of the Liberation Day tariffs (April 2, 2025). These disruptions will keep on coming.
Proactive forecasting over reactive execution is needed for strategic planning. Don’t be surprised when the next log is thrown onto the disruption bonfire.