China Is Unleashing a New Export Shock on the World
As President Trump’s tariffs close off the U.S. market,
Chinese goods are flooding countries from Southeast Asia to Europe to Latin
America.
Alexandra Stevenson
By Alexandra Stevenson
June 17, 2025, 12:00 a.m. ET
Two decades ago, China shocked the United States with its
ability to make and ship things fast and inexpensively on a scale never before
seen. The resulting surge of exports reshaped America’s economy and its
politics.
Today, a new China shock is cascading across the globe from
Indonesia to Germany to Brazil.
As President Trump’s tariffs start to shut China out of the
United States, its biggest market, Chinese factories are sending their toys,
cars and shoes to other countries at a pace that is reshaping economies and
geopolitics.
This year so far, China’s trade surplus with the world is
nearly $500 billion — a more than 40 percent increase from the same period last
year.
As the world’s two superpowers duke it out over trade, the
rest of the world is now bracing for an even bigger China shock.
“China has loads of things that it
needs to export, and whether or not the U.S. puts tariffs on China, it’s pretty
much impossible to stop the shifts in flows,” said Leah Fahy, a China economist
at Capital Economics.
The flood of exports from China is the consequence of
government policy and a slowing domestic economy. To soften the blow of a real
estate crisis that reduced the wealth of millions of households, Beijing has
for several years been shoveling money into its manufacturing sectors, which
are making far more things than there is demand for at home.
China’s global market share for all categories of goods has
risen sharply, according to an analysis by Ms. Fahy. This will continue despite
the tariffs because Beijing is unlikely to change the course of its
export-oriented policies.
By diverting the flow of its stuff to Southeast Asia, Latin
America and Europe, China has already eased the economic effect of a plunge in
demand from the United States. But it puts China in potential conflict with
trading partners that are also facing pressure from Washington.
Mr. Trump is threatening steep tariffs for the same
countries that are being inundated with more Chinese goods, like Vietnam,
Cambodia and Indonesia. Those tariffs have, for now, been put on pause for
negotiations. Some countries have benefited from an increase in investment by
foreign companies that are trying to shift production from China as quickly as
possible.
Others have also been able to reship some Chinese goods by
exporting them to the United States. But if they cannot negotiate the tariffs
much lower, homegrown companies in countries facing severe U.S. tariffs in
Southeast Asia and elsewhere could be crushed by competition from Chinese
companies.
As much as Mr. Trump has disrupted trade with tariff levels
not seen in a century, the drastic shift in China’s exports was building long
before he took office in January.
China’s property crisis — a glut of housing, plunging prices
and widespread bankruptcies — began to reverberate through the economy in 2021.
China’s policymakers wasted no time diverting cheap loans away from developers
to exporters and manufacturers, a move that eventually offset the collapse in
construction, which at its peak contributed to one-third of economic growth.
For Beijing, it was a tried-and-tested move: Throw money at
the problem.
“They often overinvest to get the
scale first, and then the process is aided by government policies,” said Tommy
Wu, an economist at Commerzbank. “That contributes to why we have this problem
today.”
China had already embarked on a domestic industrial policy
in 2015, known as Made in China 2025, to make higher-skilled, more valuable
goods like sophisticated computer chips and electric vehicles. That initiative
led the United States and Europe to raise tariffs on electric cars, solar
panels and other high-technology products.
But China’s drive to boost manufacturing since the property
market collapse has gone much further. Even while making more advanced
products, Chinese manufacturers doubled down on making tchotchkes, the kinds of
cheaper things that China excelled at making two decades ago. China rewrote the
playbook, confounding economists.
“China is not developing the way
economic theory suggests, and now we are faced with a new model,” said Priyanka
Kishore, an economist in Singapore, referring to the traditional trajectory of
economies that move away from low-end manufacturing as they become more mature
and developed.
“This is a challenge because it
exacerbates pressures on the rest of the world,” Ms. Kishore said.
With tariffs starting to realign trade flows and supply
chains, the economic effect is beginning to show.
In Germany, where shipments of Chinese goods last month rose
20 percent from a year earlier, companies have expressed concerns to Mr. Wu,
the economist from Commerzbank. Carmakers feel it most acutely.
China has made 45 percent more electric vehicles this year,
even as Chinese companies are engaged in a vicious price war at home because of
flagging consumer appetite. Exports of electric vehicles have soared 64.6
percent this year, according to the Chinese Association of Automobile
Manufacturers.
Countries that have borne the brunt of the jump in Chinese
imports have also seen sharp declines in their own manufacturing, leading to
job losses and bankruptcies.
In Indonesia, garment factories are closing, citing their
inability to compete with cheaper clothes from China. Some 250,000 people lost
their jobs in the garment industry in 2023 and 2024, said Redma Gita Wirawasta,
the chairman of the Indonesian Filament Yarn and Fiber Producers Association.
Thai auto parts manufacturers have shut down because of Chinese electric
vehicles. Brazilian carmakers have called on the government to initiate an
antidumping probe into Chinese cars sold in the country.
For most countries, there are two options. The first is to
do nothing and watch manufacturing get hollowed out, said Sonal Varma, the
chief economist for Asia, with the exception of Japan, at Nomura, the Japanese
bank.
The other option is to raise tariffs and use other
protectionist measures in specific sectors, just as the United States has done
with China. This risks the ire of China, which uses trade and investment as
leverage in its diplomatic overtures, or the United States.
“Supply chains are getting
bifurcated along geopolitical lines,” Ms. Varma said. “It has become a lot more
difficult for countries to decide: Who do you align with?”
Alexandra Stevenson is the Shanghai bureau chief for The
Times, reporting on China’s economy and society.
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