If A sells soda for 1USD to B then:
A has a trade surplus of 1$.
B has a trade deficit of 1$.
C has balanced trade.
If B then sells apples for 1USD to C then:
A still has a trade surplus of 1$.
B now has balanced trade.
C has a trade deficit of 1$.
If C then sells corn for 1USD to A then:
A, B and C have balanced trade.
The problem is when B and C trade with something other than dollars. China is keeping a large quantity of USD on hand and not trading them which messes with the value of the USD.
It's not like China is sitting on a big mountain of Ben Franklins somewhere. If it is smart (and it is), it invests the dollars it is hoarding in US Bonds or some other very safe vehicle (US Bonds might as well be bulletproof, short of WWIII). The problem is that even though China is investing in dollar-assets, this isn't counted in the silly trade deficit figures.
The US won't default on bonds anytime soon. But they are only bulletproof in terms of value when you measure value in US$ - and not in adjusted terms (inflation, purchasing power paritiy, exchange rate, etc).
Let's say A, B and C all have balanced trade:
If A sells soda for 1USD to B then: A has a trade surplus of 1$. B has a trade deficit of 1$. C has balanced trade.
If B then sells apples for 1USD to C then: A still has a trade surplus of 1$. B now has balanced trade. C has a trade deficit of 1$.
If C then sells corn for 1USD to A then: A, B and C have balanced trade.
The problem is when B and C trade with something other than dollars. China is keeping a large quantity of USD on hand and not trading them which messes with the value of the USD.