China Got Coal for Christmas…and 2026 Is When the Stockings Are Empty

Markets are focused on tariff refunds and court rulings, but the real story is structural. China’s $1 trillion trade surplus has triggered a global realignment. Mexico legislated tariffs, Europe is preparing to defend industry, capital is shifting to the Americas, and 2026 will reshape global supply chains regardless of what the Supreme Court decides.

Dan Krouse

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Markets are fixated on tariff refunds and court cases. The real story is structural: Mexico, Europe, and a hemisphere-wide realignment are quietly closing the doors on a $1+ trillion surplus — regardless of what the Supreme Court decides.

While markets obsess over potential tariff refunds and Supreme Court rulings, they’re missing the bigger story.

China got coal in its stocking for 2025. In 2026, the stockings are empty.

Not because of a U.S. court decision — but because the world has quietly decided it is done absorbing a $1+ trillion Chinese trade surplus.

The $1 Trillion Paradox

China’s trade surplus reached roughly $1.07 trillion through November 2025, up more than 20% year over year.

That figure is often treated as evidence of strength. It isn’t.

Surpluses of that magnitude signal structural imbalance, not dominance.

China exports more than four times what it imports from the United States. With Mexico, the ratio approaches 13:1. France’s bilateral deficit with China climbed toward €47 billion, while the EU’s overall deficit surged sharply in 2025.

These aren’t reciprocal trade relationships. They function as extraction systems.

And systems like that don’t get renegotiated indefinitely — they eventually get shut down.

Everyone Is Acting…Without Coordination

This isn’t a U.S-led campaign against China.

Countries aren’t copying Washington. They’re independently arriving at the same conclusion as Chinese exports are redirected into their economies.

In 2025, China offset an 18% decline in exports to the U.S. by flooding other markets:

Europe: +9%
Southeast Asia: +15%
Africa: +27%

That worked…briefly.

Now those doors are closing.

Mexico (December 2025): Approved 5–50% tariffs on more than 1,400 products from non-FTA countries, explicitly targeting China. Effective January 1, 2026. Legislative. Durable.

Europe: French President Emmanuel Macron warned that without action, Europe would be forced to “decouple, like the U.S.,” describing the moment as existential for European industry.

No coordination. No grand alliance.

Just identical conclusions reached separately.

This isn’t just about tariffs…it’s about where capital is being allowed to go.

2026: Six Acts, Empty Stockings

The fixation on roughly $138 billion in potential U.S. tariff refunds is a sideshow. Here’s what actually restructures trade in 2026.

Act 1: The Supreme Court Sideshow (Q1 2026)

Markets are betting the Supreme Court strikes down IEEPA-based tariffs.

Even if that happens:

Claims must be filed within 180 days
Documentation and pass-through analysis are required
Reviews and appeals stretch 12–24 months

Meaningful refunds don’t arrive until 2027–2028.

By then, the system is already rebuilt.

Act 2: The Tariff Pivot (Q1–Q2 2026)

If IEEPA falls, tariffs don’t disappear…they migrate.

The administration has made clear that alternative authorities are ready:

Section 232 national-security tariffs
Section 301 China investigations launched in late 2025
Section 122 — an emergency authority dormant for decades but still legally available

The legal mechanism may change. The trade posture does not.

Act 3: Mexico Goes Live (January 1, 2026)

Mexico’s tariffs take effect immediately…up to 50%.

Mexico was the largest global market for Chinese autos in early 2025. That door just closed.

These tariffs are legislative. Reversal requires Congress.

This stocking is empty.

Act 4: Europe Acts (Q1–Q2 2026)

Europe’s trade deficit with China has ballooned, driven in part by exports diverted from the U.S.

The WTO now projects near-zero global trade growth in 2026, explicitly citing fragmentation and tariffs.

Europe doesn’t need U.S. court rulings to act.

It needs survival.

Act 5: The Congressional Reckoning (Mid-2026)

The USMCA joint review concludes in July 2026.

If IEEPA is curtailed earlier in the year, Congress faces choices it has avoided for decades:

Whether tariff authority remains executive or becomes legislative
Whether tariff revenue becomes structurally embedded in fiscal policy
Whether trade frameworks require formal ratification

Canada remains insulated…too embedded in North American energy, auto, and critical-minerals supply chains to exclude.

The question isn’t rates.

It’s governance.

Act 6: Hemispheric Realignment (All of 2026)

As China’s stockings disappear, new ones are being hung — and they’re being filled with capital, not just trade preferences.

Trade follows investment. And investment is already choosing sides.

The Trump administration claims it has secured approximately $18 trillion in direct foreign investment commitments tied to U.S. and hemispheric production, infrastructure, energy, and advanced manufacturing.

Whether one accepts the full headline number or discounts it materially, the directional signal matters:

Capital is being explicitly incentivized and politically protected inside the hemisphere.

That pull is accelerating bilateral deals and physical build-out:

U.S.–Mexico trade approaching $1 trillion
Expanded bilateral frameworks across Latin America
Canada doubling down on energy, critical minerals, and advanced manufacturing
Infrastructure approvals turning into actual ports, rail, power, and logistics execution

This isn’t theoretical nearshoring.

It’s concrete, steel, and balance sheets.

Meanwhile:

Japan and South Korea increasingly align investment with hemisphere-oriented supply chains
India remains complex but strategically unavoidable
Brazil hedges…maintaining China ties while shifting incremental investment westward

What’s happening isn’t a clean break.

It’s progressive decoupling — deal by deal, factory by factory, port by port.

The sorting mechanism isn’t ideology.

It’s where capital feels protected.