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I'm skeptical there's a real mechanism for that since even Trump can't directly set those rate cuts.

There isn’t. I don’t want to imply that some institutions are independent of the control of the bourgeoisie, but the Fed has some fairly robust protections of its independence (an independence which in the grand scheme of things, serves the interests of the bourgeoisie anyway). That doesn’t mean that Trump can’t have folks roll up to Powell and threaten his position or his safety if he doesn’t comply, but that seems like a stretch to think he would do this at Trump’s behest for China when he wouldn’t do what Trump demanded earlier w/r/t rates.

Again, quoting my favorite statistics from China’s custom office:

Jan-Sep Total Year-on-year change:
ASEAN Total: Export +14.7% Import -0.4%
RCEP Total: Export +9.9% Import -0.4%
Belt and Road Total: Export +11.4% Import -2.3%

BRICS partners:
Brazil: Export -3.3% Import -6.8%
Russia: Export -11.3% Import -7.7%
India: Export +12.9% Import -2.3%
South Africa: Export +3.8% Import -1.2%

You will see that China’s export to all those regions have generally grown (and even negative in some major BRICS partners) but imports have been negative, suggesting that China is dumping its export surplus goods to the other regions, especially the EU (Export +10.5%, Import -3.8%) and effectively destroying the EU’s green tech and EV industries there.

For many exporter economies, that means further trade deficit against China and they will have to compensate for that by ramping up the export of their goods elsewhere, to America, for example.

The figures you quoted for those countries do not explain how else are those countries going to improve their trade surplus (current account) from their worsening trade deficit with China, where running a trade surplus for those countries who have bought into the IMF export-led growth strategy is a core aspect of neoliberal free trade economics. In other words, they have no choice but to appease the US even more in order to gain access to the US consumer market.

Again, you can see that without a strong domestic consumption economy, China’s vast industrial capacity is essentially the mercantilistic weapon wielded by the US to destroy the industries in the rest of the world and reshapes it under its new interests, as evident by the many countries signing trade deals with Trump.

And I have said this before, if China fails to transition into domestic consumption economy, the Belt and Road Initiative will effectively become a new supply chain built by the Chinese, but gifted to the Americans.

The rate cuts are coming after trade agreements, which are all happening on China's terms. Does that mean that China is determining the policy of the Federal Reserve? I'm skeptical there's a real mechanism for that since even Trump can't directly set those rate cuts. Instead, I think the Fed is responding to trade negotiations.

You are assuming that the White House has no advanced information from the Fed about their key rate policy days in advance, and has to find out from the news network in real time as does everyone else.

Of course the US federal government has prior information from Powell even if the Fed is technically “independent”, otherwise how else do you think the government typically coordinates its economic policies to ensure market stability if the Fed can just switch the key rates up and down on a whim?

Perhaps the biggest indicator that the Fed rate is a carrot dangled by the US imperialists for China is what happened back in September 2024, when the Fed lowered its rate for the first time since Biden hiked it in 2022. Within a week, China immediately followed up with its major monetary easing policy (the “924 policy”) as its first attempt to reduce the burden of the local government debts. So, everything tracks here: the Fed has a direct influence on China’s local government debt burden, and it seems China desperately needs it to overcome the impending debt crisis.

Finally, Trump is simply one of the roles you see on the stage here. The US finance capital (the entire behemoth of Wall Street) is not panicking yet, that should tell you how much they already have Trump kept under their control, nearly a decade after his first surprise electoral victory in 2016.

Actually, contrary to popular beliefs, China’s economy is highly decentralized, which means that the central government sets the goals, but the local governments have a lot of authorities to implement (and interpret) the policies in their own ways.

If there had been proper economic planning and coordination, we wouldn’t be seeing a glut in property and industries (EV and solar panels, for example). Such massive waste in capital, resource and labor misallocation that could have better served the people if there had been proper planning.

Similarly, Xi wouldn’t be scolding the local governments about their obsession with EVs and green tech if there had been proper coordination: “上项目，一说就是几样：人工智能、算力、新能源汽车，是不是全国各省份都要往这些方向去发展产业？” (“Every time a new project is mentioned, it’s always the familiar ones: artificial intelligence, computation, renewable energy cars, do every province across the country have to develop these same industries?”)

The way the Chinese system works is that the central government relegates a lot of autonomy to the local governments (which has historical reasons that can be traced back to the 1994 Tax Sharing Reform, which I had written extensively about, you can search for my posts), while it sets the goals for local development through controlling local official promotion - the main KPI is GDP growth numbers, which is why you see China is so obsessed with reaching a certain GDP target every year, because that’s literally how you advance your career.

As a result, most provinces and local governments compete with one another to build new infrastructure and housing, give massive subsidies (through heavy borrowing) to promote industries (for example, green tech prioritized by the 14th FYP) without coordination at the national level. Because the goal is to bring the GDP numbers up. Overcapacity? Oversupply of housing? Every provinces making the same thing? Who cares? That’s for the central government to worry about.

This is how you end up with a glut/overcapacity, the local governments in massive overhanging debt, and now the central government has to come in and consolidate the industries, which means there will be winners and losers. In other words, there will be people who get to keep their jobs, while many others will lose their jobs, further contributing to a deflationary economy.

This is why the Unified National Market is supposed to be introduced in the coming Five-Year Plan to help resolve such issues caused by the lack of coordination and recklessness between the local governments (read my post here).

However, the key question is whether the market will be unified through more centralization (through central economic planning) or more liberalization of market (let the private sector decides what it wants with minimal governmental interference)? In either case, the authority of the local governments will be curbed for sure in the coming years.

When China becomes a domestic consumption economy, which necessarily involves raising the household income, and thereby the purchasing power of the people, it will also entail losing the net exporter status because China’s export goods will no longer remain competitive, at least for the low-intermediate value added industries.

So, the reduction in trade surplus and a shift towards balanced trade and even running a deficit is simply a natural consequence of such economic policy. It is a policy choice. It means people working less hours, have more time to enjoy leisure, as there is no longer a need to accumulate massive amount foreign assets through exports.

Note that China running a $1 trillion trade surplus every year means - on a very simplistic sense - that Chinese labor has created $1 trillion of value added goods while receiving nothing of substance in return (other than a number in the accounts in Chinese banks). In other words, it is practically a gift of real goods and services to the rest of the world, especially for the wealthy Western economies that leverage their high currency exchange rate to extract surplus values from the developing world.

All of that shipment could sink while en route to their export destinations for all we care and it does nothing to improve the lives of the Chinese people, except that the government has followed the IMF policy that advocates countries accumulate foreign assets such that domestic spending can occur without running into deficit.

Im asking because isnt US trade deficit only possible because of it's imperialistic nature? And if China were to run a trade deficit wouldnt it necessitate China becoming imperialist?

Only if by choice. The problem with most Global South exporter countries is that they have invested billions and billions over the past 30-40 years into export-oriented industries, having listening to the IMF. This made any decision to transition away from export economy very difficult and costly, and since there is no guarantee for a payoff (what happens when the US sanctions your economy because your economic model isn’t aligned with the US interests? is “good guy” China going to come and save your economy?), most countries would not and could not afford to do that. Especially so if your country depends on importing essential goods from other countries. Most importantly, BRICS has failed to present itself as an alternative bloc where countries can depend on to shift their economy towards.

China is very different though, for that it already commands 31% of the global manufacturing capacity. There is no clear obstacles for China to import from other countries, except for certain high tech stuff that some countries want to protect. But for the most part, whether it is food or energy, China will not have any trouble getting them.

The ideal scenario is that China imports from the other developing countries (running a trade deficit) such that those countries would not have to rely on selling to the US. This will be crucial for de-dollarization. Furthermore, China can use its vast foreign reserves to pay off the foreign currency-denominated debt of many Global South countries, which will also be critical for reducing the reliance of those countries on the US.

By reducing the reliance of developing countries on exporting to the US and other advanced Western economies, it will provide them with more freedom to pursue economy policies that benefit their own people, rather than to supply cheap goods to serve the West (and in doing so, suppressing the purchasing power and consumption demand of their own people). This will be a good start no matter how you look at it.

Western economists have been calling out China’s underconsumption and overinvestment problems for years.

The key here is that they do not have the solution for it. They still believe that running high deficit is bad, and they think if China tries to run high deficit to resolve this problem, it will be very very bad for China’s economy.

People like Michael Pettis are especially guilty of this. He correctly identifies the balance of payment issues, but is otherwise wrong on the solution. Funnily enough, he lives in Beijing and is actually very well known in the Chinese economic circle. So I have no doubt that the policymakers and government officials are familiar with his work, and that many economists in China listen to people like him.