The Club PUBlication 06/23/2025

China’s exports again change economies and geopolitics
Story by ALEXANDRA STEVENSON Photos by GILLES SABRIÉ •
​The New York Times

​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 Donald 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, China's trade surplus with the world is nearly $500 billion — a more than 40% 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 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.

Trump is threatening steep tariffs for the same countries that are being inundated with more Chinese goods, such as 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 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 onethird of economic growth.

For Beijing, it was a triedand-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 higherskilled, 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," 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% from a year earlier, companies have expressed concerns to Wu, the economist from Commerzbank. Carmakers feel it most acutely.

China has made 45% 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% 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, chair 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.
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"Supply chains are getting bifurcated along geopolitical lines," Varma said. "It has become a lot more difficult for countries to decide: Who do you align with?"