president Trump’s strategy in the trade dispute with China hinged on the belief that tariffs would force China to negotiate new trade terms.The assumption was that China’s dependence on the U.S. market would compel them to “absorb” the increased export costs.

However, recent trade data suggests a shift in this dynamic. Chinese exports to the U.S. have experienced a sharp decline, as China actively diversifies its export destinations. This trend could undermine the leverage the U.S.hoped to wield in trade negotiations, despite the current temporary truce.

New data shows that Chinese exports to the U.S. fell by over 34% in May 2025 compared to the previous year. This follows a 20% drop in april, signaling a intentional move away from the U.S. market.

Chinese exporters are finding new opportunities in markets like Africa, where exports rose by 30% YOY in May, and Canada, with a 20% increase over the same period, according to analysis by Convera, a specialist in FX and international payments.

George Vessey, lead FX and macro strategist at Convera, suggests this diversification could weaken President Trump’s negotiating stance. He told Fortune that the data “may be seen as undermining President Trump’s position and ability to hurt China.”

implications of Export Diversification

The shift in export strategy could have broader implications, potentially escalating trade tensions with other countries. “Still, given the disinflationary impact this is expected to have on other countries, it raises the risk of the trade war escalating elsewhere with other countries forced to impose their own tariffs on China,” Vessey added.

“Trade talks between major economies remain pivotal, shaping inflation and global market dynamics.”

Vessey also noted that the U.S. share of overall Chinese exports has fallen from around 23% at the beginning of the century to 16%.

He cautioned that while Chinese exports typically decline around the Chinese New Year, the usual rebound has not occurred this year. Instead, a surge in U.S. imports in the first quarter came primarily from Europe, not China.

Current Trade Truce

Thes developments coincide with ongoing discussions between Chinese officials and President Trump’s aides in London. The U.S. and China are currently observing a truce, initiated in May with a 90-day pause announced by Treasury Secretary Scott Bessent.

Under this agreement, both sides have lowered their tariff rates, with China facing a 30% tariff and the U.S. a 10% tariff.

While analysts hoped for more clarity on a potential long-term deal during the U.K. meetings, the outcome was primarily a reaffirmation of the existing truce and a framework lacking specific details.

President Trump stated that a deal was “done,” pending approval from President Xi, adding that “rare earth and magnets would be ‘up front’ in the agreement.”

Jim Reid of Deustche bank wrote that “this left a sense that the two sides had re-established the trade truce that was signaled in Geneva last month, but with the path forward towards any genuine trade normalisation still unclear.”

Vessey concluded: “Trade talks between major economies remain pivotal, shaping inflation and global market dynamics. We’ve heard some positive developments over the past week, but until there’s more clarity, investor sentiment may pivot back to macro drivers.”