US Treasury Secretary targets China’s record trade surplus at G20 ahead of Xi-Trump summit

KUALA LUMPUR, ASHEVILLE, NORTH CAROLINA, WASHINGTON, BEIJING, BUSAN, SOUTH KOREA, STRAIT OF HORMUZ, MALAYSIA, SOUTHEAST ASIA, 1 SEPTEMBER 2026 —

KUALA LUMPUR, Aug 31 — US Treasury Secretary Scott Bessent on Monday singled out China’s widening global trade surplus, warning of “excessive imbalances” that threaten global prosperity, ahead of a high-stakes summit between Chinese President Xi Jinping and US President Donald Trump scheduled for next month in Washington.

While not naming China directly, Bessent emphasized that both surplus and deficit countries benefit from correcting imbalances. “We have seen how distorted policies that privileged countries’ own exports have harmed many of the economies represented here today,” he said. He condemned “beggar-thy-neighbour” tactics that stifle market-based competition, a thinly veiled reference to Beijing’s export-driven growth model.

The US has elevated trade imbalances as a central theme of the G20 talks, echoing long-standing complaints about China’s large and growing trade surplus. A surge in Chinese exports—particularly in automobiles, solar panels, and batteries—has raised concerns among G20 members over alleged “overcapacity,” fueled by state subsidies and weak domestic consumption. Beijing denies these claims.

China’s global export volume reached a record US$1.2 trillion in 2025, a 20% increase from the previous year, according to official data. “The world cannot have a China with a US$1.2 trillion trade surplus,” Bessent told Reuters on Sunday. “In China, the economy is quite weak, and they are trying to export their way out of it, and they need to rebalance their economy.”

China swiftly rejected the criticism. Foreign Ministry spokesman Guo Jiakun stated at a Monday press briefing in Beijing: “China never deliberately pursues a trade surplus and opposes unilateral tariff measures in all forms.”

Washington has responded with a series of trade restrictions, including tariffs, national security-based import bans, and tighter scrutiny of Chinese goods. According to the US Trade Representative, bilateral goods trade between the US and China fell to an estimated US$414 billion in 2025, down about 28% from 2024. However, economists caution that the decline may be partly offset by rerouting through third countries.

China has consistently denied that state subsidies drive industrial overcapacity. In a position paper released last month, the Ministry of Commerce argued that subsidies are a legitimate tool for national development, citing the US Inflation Reduction Act’s US$750 billion in domestic clean energy incentives as a comparable example.

“It is imperative that all countries make the pie of global development bigger and introduce subsidies and other industrial policies in a rational and compliant manner,” the ministry said.

The US push at the G20 comes as both nations finalize economic deliverables for the anticipated Xi-Trump summit. One key outcome is the planned launch of a bilateral Board of Trade, which will identify non-sensitive sectors eligible for reduced tariffs, capped at US$30 billion per side.

The South China Morning Post reported last week that the temporary trade truce agreed in Busan, South Korea, in October 2025—including tariff reductions, suspended restrictions on Chinese-affiliated firms, and a one-year pause on rare earth export controls—is likely to be extended.

On the sidelines of the G20 meeting, Bessent met with People’s Bank of China Governor Pan Gongsheng on Sunday. “I had a very meeting with Governor Pan last night,” Bessent told CNBC on Monday, though he did not disclose further details. The Chinese delegation is led by Vice Minister of Finance Liao Min.

Beyond trade, the US is also rallying global support to tighten economic pressure on Iran. Last week, Bessent announced “Economic D-Day” sanctions targeting 60 individuals and entities, including Hong Kong firms and Chinese nationals, though major Chinese banks were spared. He dismissed suggestions that isolating Iran required Beijing’s cooperation, asserting that only 30 million barrels of Iranian oil remain on the open market due to a US-led blockade.

“Even if they were to get remittances from China, that’s going to run out,” he said.

Bessent added that the US and China share common ground on Iran, including opposition to nuclear weapons and support for free navigation through the Strait of Hormuz. China, however, condemned the sanctions, calling them a violation of international law. “Economic wars and maximum pressure are not the solutions,” Foreign Ministry spokesman Lin Jian said. China remains Iran’s largest oil buyer, purchasing over 80% of its exports in 2025, according to Kpler data.

For Malaysia and Southeast Asia, the escalating US-China trade tensions carry significant implications. Regional economies, deeply integrated into global supply chains, face risks from protectionist measures and rerouted trade flows. Malaysian exporters of electronics, solar components, and automotive parts could see both challenges and opportunities as firms adapt to shifting trade routes and tariff regimes.

Industry analysts note that Malaysia’s position as a key node in China-centric supply chains may face pressure if US-China trade diversion accelerates. However, the country’s ongoing efforts to diversify export markets and attract high-tech investment could mitigate some risks. The government has not issued an official response to the G20 developments.

As the Xi-Trump summit approaches, the focus remains on whether the two sides can stabilize trade relations and prevent further escalation. The proposed Board of Trade and potential extension of the Busan truce offer tentative signs of progress, but underlying structural issues—subsidies, overcapacity, and strategic competition—remain unresolved.

With the G20 spotlight now on trade imbalances and geopolitical flashpoints like Iran, the coming weeks will test whether dialogue can outpace confrontation. For now, the world watches as Washington and Beijing navigate a delicate balance between economic rivalry and shared global responsibilities.