China floods the world with cheap exports after Trump’s tariffs

BEIJING - China’s export engine has proved unstoppable during five months of sky-high US tariffs, sending the country hurtling towards a record US$1.2 trillion (S$1.5 trillion) trade surplus.

With access to the US curtailed, Chinese manufacturers have shown they are not backing down: Indian purchases hit an all-time high in August, shipments to Africa are on track for an annual record, and sales to South-east Asia have exceeded their pandemic-era peak.

That across-the-board surge is causing alarm abroad, as governments weigh the potential damage to their domestic industries against the risk of antagonising Beijing – the top trading partner for over half the planet.

While so far only Mexico has hit back publicly in 2025, floating tariffs as high as 50 per cent on Chinese products including cars, auto parts and steel, other countries are coming under increasing pressure to act.

The Indian authorities have received 50 applications in recent weeks for investigations into goods dumping from nations including China and Vietnam, according to a person familiar with the matter who asked not to be identified as the information is not public.

Indonesia’s trade minister pledged to monitor a deluge of goods, after viral videos of Chinese vendors touting plans to export jeans and shirts for as little as 80 US cents to major cities caused outcry.

For all the pain, the chances of more meaningful action are limited. Countries already embroiled in tariff negotiations with the Trump administration appear reluctant to take on a separate trade war with the world’s second-largest economy. That is giving Beijing breathing room from US tariffs at heights that economists previously predicted would halve the nation’s annual growth rate. 

“The subdued response is probably informed by ongoing US trade negotiations,” Gavekal Dragonomics deputy China research director Christopher Beddor said. “Some countries may not want to be seen as contributing to a breakdown in the global trading system. Some may also be holding back on tariffs against China in order to offer them as concessions to the US during their own trade negotiations.”

Officials shielding their economies from Beijing are treading carefully. South Africa’s trade minister has advised against punitive tariffs on Chinese car exports – which nearly doubled in 2025 – and is instead seeking more investment.

Chile and Ecuador are quietly imposing targeted fees on low-cost imports, after Chinese e-commerce giant Temu’s monthly active users in Latin America soared 143 per cent since January. 

While Brazil has threatened more aggressive retaliation, this summer it gave China’s biggest electric carmaker BYD a tariff-free window to ramp up local production. 

Beijing is using both diplomatic charm and economic threats to prevent countries from taking outright retaliation.

Earlier in September, Chinese President Xi Jinping rallied Brics nations to forge a united voice against protectionism during a leaders’ call of the bloc, while Commerce Ministry officials have warned Mexico to “think twice” before acting, making clear such steps will have recriminations.

Adding to the risks, US President Donald Trump is pressuring Nato nations to impose tariffs of up to 100 per cent on China over its support for Russia.

While Chinese exporters are defying the odds, surging trade is not making them richer – or helping the nation’s domestic issues.

Profits at industrial firms fell 1.7 per cent in the first seven months, as manufacturers trying to reduce overcapacity at home under Mr Xi’s “anti-involution” drive slashed prices to sell more overseas.

That is only worsening China’s sticky deflation, on track for its longest spell since the country began opening up in the late 1970s.

The export explosion could also undermine Beijing’s efforts to rebalance its economy towards stimulating consumption – defying foreign officials such as US Treasury Secretary Scott Bessent, who has urged Beijing to make boosting the Chinese consumer a pillar of its blueprint for the next half-decade.

China’s policy document outlining those plans will be in focus in the coming weeks at a key Communist Party meeting. 

For Mr Xi, the risks might just be worthwhile. Showing the world that China does not need the US consumer strengthens his hand going into a high-stakes meeting with Mr Trump at a summit in South Korea.

The world’s biggest economies are still hashing out a possible trade deal, with a 90-day pause on tariffs as high as 145 per cent currently keeping the peace.

China shock 2.0 

Even before Mr Trump stunned the world with the US’ steepest tariffs since World War II in April, emerging markets at risk of shedding millions of manufacturing jobs were worried about a glut of Chinese goods.

Indonesia’s previous president threatened a 200 per cent tariff to protect local industry, while Brazil has hiked duties on Chinese steel.

Even Vietnam took temporary action against Chinese online retail giants that undercut local sellers.

Ultimately, it has been hard for foreign leaders to protect their economies from China’s vast fleet of factories.

“Protectionism from the US and other countries has turned into a paper tiger because Chinese exporters are extremely competitive,” said Gavekal Dragonomics head of research Arthur Kroeber.

They “can absorb some of the tariff hit and also have plenty of workarounds through transshipment and relocating late-stage production to lower-tariff countries”, he added.

Cambodia’s central bank governor Chea Serey was candid about the balancing act that smaller economies reliant on Beijing are having to perform.

“We do import a lot from China,” she told Bloomberg Television in September, when asked about Chinese dumping. “We also rely a lot in terms of foreign direct investment from China.”

While a rise in shipments to Vietnam suggests some goods destined for US shores and other places are being rerouted to bypass Mr Trump’s wall of tariffs, that is only part of the picture.

Demand for China’s world-beating, high-tech innovations helped drive much of the recent traffic. Rising sales to wealthy markets in Europe and Australia also indicate Beijing simply found new buyers for many products.

India shows how Mr Trump’s redrawing of the global trade map is benefiting Beijing in new ways. Exports to China’s neighbour hit a record US$12.5 billion in August, driven largely by Apple’s suppliers rapidly shifting output of iPhones to India from China. Those companies, however, still depend on parts and tooling made mostly in China. 

In July, Chinese firms shipped almost US$1 billion worth of computer chips to India and billions of dollars more worth of phones and parts, according to data released by Beijing.

That puts exports on track to exceed 2024’s record, with the value of shipments so far in 2025 almost as large as the whole of 2021.

“China has performed better than expected in the first half,” JPMorgan Chase & Co’s chief India economist Sajjid Chinoy told Bloomberg Television. “Some of this is the fact that China has very cleverly found other export markets, including Europe, which has been a key hedge to slowing exports to the US.” 

A weaker currency gave China another edge. The renminbi has depreciated along with the US dollar against currencies like the euro.

Macquarie Bank previously estimated the renminbi’s real effective exchange rate – which accounts for inflation differentials between a nation and its main trading partners – was at the weakest level since December 2011.

And the US Federal Reserve’s rate cut last week could drag the US dollar and possibly the renminbi down further, boosting both global demand and also the competitiveness of Chinese exports. 

For all the consternation around the world, the glut of goods cascading from China will not be easy to stop.

Chinese electric car exports have continued to power ahead despite steps by the US and Canada to curb them with punitive tariffs and bans. 

In the first seven months of 2025, carmakers such as Nio, BYD and Xpeng exported more than US$19 billion worth of electric-powered vehicles, about the same as in the same period in 2024, with Europe being the largest market even after the European Union imposed tariffs last October. 

China is in a better position than many other countries to find alternative markets to the US, according to Mr Adam Wolfe of Absolute Strategy Research.

Its analysis shows there is almost a 50 per cent overlap between what China sold to the US and what it exports to Brics nations, suggesting much of what the US no longer buys can be shipped to other markets. 

“China’s shown this ability to move into other markets and get market share abroad and that probably continues,” said Mr Wolfe. “I don’t know that China is going to see a contraction in exports over the rest of the year.” BLOOMBERG