A Bottom Is In for U.S.-China Trade

A bottom is now in for trade between the U.S. and China. It might even be *the* bottom for the global tariff war that began in April 2025 but only time will confirm that for sure.

What we do know for sure is that May 2026 saw the first increase in the rolling twelve month average of the value of goods exchanged between the U.S. and China for the first time since January 2025.

There are also indications that trade will continue to increase in the short term. A report out of China hints at what will be happening:

China-US goods trade totaled 2 trillion yuan ($294.1 billion) in the first half of the year, accounting for 7.9 percent of China’s total foreign trade, with the second quarter rebounding to 13.7 percent growth after an 18.7 percent slump in the first quarter, a customs official said at a press conference on Tuesday in response to a question about the recent acceleration in Chinese exports to the US and the outlook for bilateral trade in the second half.

A Chinese expert said that the recovery of China-US goods trade in the second quarter, with bilateral trade turning positive after a decline in the first quarter, was mainly driven by improving trade relations and lower US tariff rates, which helped restore market confidence and support trade activity.

The apparent improvement is being acknowledged after President Donald Trump traveled to China to meet with Chinese leader Xi Jinping in May 2026. The relative truce between the two nations in their tariff war so far seems to be holding with Trump restraining trade hardliners in his administration for now.

Meanwhile, other news out of China this month points to a concrete reason behind why trade between the U.S. and China will continue to increase in the next few months:

Chinese exporters gained an advantage as U.S. retailers moved up their orders by four to six weeks to build inventory for Black Friday and Christmas sales ahead of anticipated tariff increases later this year.

Typically, goods shipped to support the Christmas holiday season in the U.S. peak in October 2026. Moving those shipments up by four to six weeks could move the annual seasonal peak to either August or, more likely, September 2026.

On the U.S. side of U.S.-China trade data, the following chart shows the uptick off a bottom for the trailing twelve month average of the value of goods exchanged between the U.S. and China in May 2026, with April 2026 representing a bottom (if not definitively yet *the* bottom):

That bottom also confirms our prediction from last month that “the level of trade between the U.S. and China will bottom in 2026-Q2. It may already have, but we won’t get the data to confirm it for at least another month or two.”

It looks like it had already happened at that writing!

References

U.S. Census Bureau. U.S. International Trade in Goods and Services (FT900). U.S. Trade in Goods with China, Not Seasonally Adjusted, Nominal Figures, Total Census Basis. [Online database]. Accessed 7 July 2026.

Image credit: A close up of Scrabble tiles spelling the words China, USA, and TariffsPhoto by Markus Winkler on Unsplash.