U.S.-China trade remains one of the most influential and contentious bilateral relationships in the global economy. In the decades following China's reform and opening-up, the country has emerged as the "world’s factory", leveraging low-cost labor, robust supply chains, and large-scale manufacturing capacity. As a result, China has consistently recorded substantial trade surpluses with the United States. These figures are often cited as evidence of "unfair trade", fueling a series of tariff barriers and trade frictions. Some voices in China argue that the U.S. resorts to a trade war with China simply because it cannot tolerate the deficit, which they view as fundamentally unfair. However, researchers at ANBOUND see that this surplus reflects only part of the picture. The structural reality is that “the surplus stays in China, but the profits end up in the U.S.”.
Analysis by the Yicai Research Institute shows that China’s trade surplus with the U.S. reached USD 404 billion in 2022 and USD 361 billion in 2023. Based on estimates of total U.S.-China merchandise trade in 2024, the U.S. trade deficit with China is projected at USD 295.5 billion, the lowest since 2009, yet still the largest trade deficit the U.S. holds with any single country. As we move into 2025, despite the heightened global uncertainty brought on by the ongoing tariff wars, the trend of China exporting significantly more to the U.S. than it imports continues. Data from July and August this year show that China’s monthly trade surplus with the U.S. exceeded USD 20 billion in both months. This reflects the enduring competitiveness of China's manufacturing sector, particularly in consumer electronics, machinery, and textiles, areas where Chinese exports maintain a significant share of the U.S. market.
However, this trade surplus is not a comprehensive reflection of China’s economic strength. It is, in fact, a byproduct of global production and supply chain dynamics. One could even argue that this situation is largely the result of how U.S. multinational corporations have structured their global industrial supply chains. Many of the products China exports are either intermediate goods or final assembly products, and because these rely heavily on imported raw materials and high-tech components, the foreign exchange reserves generated by the surplus, while substantial, have not translated into sustainable profit growth.
To truly understand the essence of “the surplus stays in China, but the profit goes to the U.S.” within this broader context, one needs to look at the concept of Trade in Value Added (TiVA). Developed jointly by the OECD and the WTO, this indicator strips out the imported content from gross trade figures, revealing the actual value each country contributes within the global value chain. According to TiVA data, China’s share of value added in its exports to the U.S. increased from 1.42% in 2005 to 2.72% in 2015. However, on a value-added basis, China’s trade surplus with the U.S. shrinks significantly.
Conventional trade statistics often overstate the U.S.-China trade deficit because many Chinese exports contain components imported from economies such as South Korea, Japan, Taiwan, and others; these are countries and regions that account for a high share of the value added in those goods. Based on the latest available OECD data (2020), U.S. final demand accounts for only about 3% of China’s total economic output. Moreover, the value-added component of China’s exports to the U.S. is much lower than the gross export figures suggest. In other words, while China records a large trade surplus, the actual economic gains are diluted. The surplus is largely concentrated in assembly and low-end manufacturing, whereas the profits from high-tech components are captured by upstream suppliers and U.S. brand owners. Overall, by controlling key links in the global value chain, the U.S. ensures that profits ultimately flow back to its own economy.
It is worth noting that this imbalance is not limited to goods trade; it also extends to services. In 2024, the U.S. recorded a USD 33.2 billion services trade surplus with China, a year-on-year increase of 16.7%, driven primarily by intellectual property licensing, financial services, and software exports. These macroeconomic figures highlight a crucial contrast. In 2024, China achieved a global trade surplus of approximately USD 992 billion, while the U.S. registered a trade deficit of USD 1.2 trillion. Yet, this has not undermined America's economic dominance because the balance of profit distribution continues to tilt in the U.S.'s favor.
To make this more concrete, the Apple iPhone offers a classic example. Take the iPhone X, for instance: its material cost is approximately USD 409.25, of which Chinese companies contribute around USD 104, or 25.4%. However, this contribution mainly comes from assembly and some low-end components, with the actual value added by Chinese firms being significantly lower. Research indicates that Chinese companies account for only about 2.5% of the total cost of an iPhone, while companies from countries and regions like U.S., South Korea, Japan, and Taiwan collectively make up over 80%. Looking at the latest iPhone 16 released in 2024, China's value-added contribution is estimated at just USD 38.89. In contrast, Apple captures the majority of the profits through design, software, and brand premium. Based on estimates of the value chain structure, for every USD 100 in iPhone profits, U.S. companies receive about USD 50, Chinese firms around USD 10, and the remaining USD 40 goes to other suppliers.
Dell laptops offer another typical example. Dell's annual procurement volume in China reaches USD 25 billion, making it one of the country’s largest exporters. Based on industry reports, supply chain analysis, and TiVA research, along with publicly available data, estimates suggest that Chinese supply chains including displays, batteries, and assembly, contribute roughly 35%–45% of the material cost of each Dell laptop. However, the actual value added in China is only about 10%–15%, mainly from assembly and some low-end component manufacturing. Dell captures approximately 55%–60% of the profit through design, software such as integration with the Windows ecosystem, chips like Intel processors, and brand premium. Take a typical mid-range Dell XPS 13 as an example: its material cost is about USD 600, with around USD 200 worth sourced from China, but the actual value added by Chinese firms is only from USD 30 to USD 50. In contrast, U.S. companies, including Dell and chipmakers like Intel and AMD, capture around USD 300 in profit per device through patents and control of key technologies. This illustrates a broader pattern: whether it's laptops, smartphones, or other high-tech products, the value-added share of China’s exports is generally quite low. The U.S., by maintaining control over the high end of the value chain, secures a dominant share of the profits.
China has long emphasized the issue of insufficient trade profits, which lies at the heart of the structural problems discussed above. As U.S.-China trade negotiations continue at a slow pace, some foreign media have even suggested that China is adopting a new stance of remaining open to dialogue but making few concessions. In fact, when it comes to the future of this bilateral trade relationship, China is fully capable of highlighting the reality that “the surplus stays in China, but the profit goes to the U.S.” as a key point in negotiations. This perspective, grounded in data and real economic dynamics, could serve as a more practical bargaining chip, rather than simply repeating claims of "unfairness".
In the context of China-U.S. trade, the U.S.'s current emphasis on the trade "surplus" is, in essence, a manifestation of Trump-era fiscal nationalism. After U.S. multinational corporations have already taken the lion’s share of the profits, the U.S. government now steps in to claim an additional portion of the already-thin margins. This reflects the extension of U.S. fiscal dominance on a global scale. To put it bluntly, this approach is not truly based on the broader interests of the American public, as it may appear on the surface, but rather on the political interests of specific U.S. administrations and certain interest groups. Against this backdrop, there is a clear rationale for framing future trade negotiations between China and the U.S. within the broader context of major power relations.
For China, this means it is crucial to develop additional bargaining chips beyond trade itself, in order to address the trade surplus issue within the broader framework of major power relations.
Final analysis conclusion:
The core feature of U.S.-China trade lies in the fact that “the surplus stays in China, while the profit goes to the U.S.”. Looking forward, China needs to place greater emphasis on the broader framework of major power relations in trade negotiations, focusing on the political dimension to drive industrial upgrading and reshape bilateral relations.
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Zhijiang Zhao is a Research Fellow for Geopolitical Strategy programme at ANBOUND, an independent think tank.
