Goldman Sachs anticipates a 5% decline in China’s export volumes for both 2025 and 2026. This expectation is due to increasing U.S. tariffs and deteriorating trade relations.

The bank’s analysts assert that achieving a near-term deal is unlikely, with heightened U.S. tariffs impacting Chinese exports heavily. Some relief might come from rerouted trade through Southeast Asia.

Trade Surplus Decrease

Additionally, Goldman predicts a slight decrease in China’s goods trade surplus. It is expected to decrease to 3.7% of GDP in 2025, down from 4.0% in 2024.

This analysis projects a downward shift in China’s trade momentum over the next two years, primarily underpinned by growing political wrangling over tariffs and protectionist tendencies abroad. When one links that to movements in the dollar and Asian currencies, it starts to construct a rather narrow window for short- to medium-term macro strategies that had previously relied on robust Chinese export figures.

Goldman’s expectation of a steady contraction—5% in export volumes for each of 2025 and 2026—isn’t based on cyclical softness alone. What they’re highlighting is more persistent: a reflection of how trading partners are recalibrating their supply chains, likely lessening reliance on Chinese-origin goods. In our view, this is not a momentary disruption, but a structural redirection that may extend well beyond the assumed timeframe.

The projected dip in China’s goods trade surplus—going from 4.0% of GDP in 2024 to 3.7% in 2025—sounds minor on the surface, but such adjustments ripple into currency markets and yield expectations. Anyone gauging medium-dated interest rate derivatives or synthetic exposures to Chinese trade themes should pay closer attention here. The narrowing surplus undermines the yuan’s support levels, and it creates asymmetry in forward pricing, particularly when considered alongside ongoing policy divergence between Beijing and Washington.

Shifts In Trade Dynamics

What’s also embedded in this shift is the loss of reliability in headline exports as a barometer for broader economic strength. That could blunt the appeal of certain Asia-focused carry trades that had assumed a stable export sector. Regional equity-linked derivatives might see declining directional bias if domestic consumption doesn’t pick up the slack.

From our side, this brings about more opportunity in spread structures rather than directional bets. Especially when rerouted trade flows into Southeast Asia begin to skew formal reporting. We will need to monitor the gaps between official figures and actual cargo data, looking for discrepancies that might suggest larger shifts under the hood.

So, while the headline impact of the tariffs dominates the discourse, the secondary effects—on sentiment, hedging demand, or monetisation of trade flows—are just as relevant. Secondary volatility indicators in Asian currencies might underprice these shifts if market participants anchor exclusively to top-line figure changes.

The idea of a near-term political resolution appears to be firmly off the table, according to the report. That lack of policy visibility removes any short gamma opportunity too closely tied to government negotiation cycles. It’s improbable that there will be fast progress, and time decay on options linked to such milestones will increase. We might see more compressed realised volatility readings, not due to optimism, but simply from reduced optionality in positioning.

With that in mind, evaluating correlation changes—especially between commodity-exporting economies in the ASEAN bloc and China—could help reframe strategies into the next quarter. Fixed income volatility derived from Chinese macros is in flux, and existing exposures should be reassessed with this narrowing trade gap in sight. Not everything will move in sync, and correlation decay could present better targeting if latency is kept low.

Weakness in export strength transfers to softening industrial demand, and that will reflect in logistics data and metals consumption long before it prints in official figures. Watching steel or copper order flows through regional shipping lanes might offer early reads on trade resilience—or its continued fading. We’d argue that gathering signs are there already.

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