China is hurtling towards a record $1.2 trillion trade surplus.
China Floods the World With Exports
Bloomberg reports China Floods the World With Cheap Exports After Trump’s Tariffs
With access to the US curtailed, Chinese manufacturers have shown they aren’t backing down: Indian purchases hit an all-time high in August, shipments to Africa are on track for an annual record and sales to Southeast 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 antagonizing Beijing — the top trading partner for over half the planet.
While so far only Mexico has hit back publicly this year — floating tariffs as high as 50% on Chinese products including cars, auto parts and steel — other countries are coming under increasing pressure to act. 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 isn’t 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 an outcry.
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 this year — 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% since January. While Brazil has threatened more aggressive retaliation, this summer it gave China’s biggest electric car maker, BYD Co Ltd, a tariff-free window to ramp up local production.
While Chinese exporters are defying the odds, surging trade isn’t making them richer — or helping the nation’s domestic issues. Profits at industrial firms fell 1.7% in the first seven months, as manufacturers trying to reduce overcapacity at home under Xi’s “anti-involution” drive slashed prices to sell more overseas. That’s 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 toward 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 Xi, the risks might just be worthwhile. Showing the world China doesn’t need the US consumer strengthens his hand going into a high-stakes meeting with 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% currently keeping the peace.
China Shock 2.0
Even before Trump stunned the world with America’s 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% 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.
“Protectionism from the US and other countries has turned into a paper tiger because Chinese exporters are extremely competitive,” said Arthur Kroeber, head of research at Gavekal Dragonomics. 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.”
China’s trade surplus last year was almost $1 trillion and is on track to exceed that in 2025, based on Bloomberg calculations.
While a rise in shipments to Vietnam suggests some goods destined for US shores and other places are being re-routed to bypass Trump’s wall of tariffs, that’s 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.
In July, Chinese firms shipped almost $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 last year’s record, with the value of shipments so far this year 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.”
Not the Road to Rebalancing
China is not doing itself any good with these tactics. Exporting goods at a loss does not benefit China.
The net result for China is that it is subsidizing its exporters at the expense of Chinese consumers who foot the bill.
The other beneficiaries are global consumers. I would love to buy a pair of jeans for 80 cents.
But few countries want that. Trump in particular wants consumers to pay more and get less. And manufacturing jeans will not return to the US anyway. So all we get are higher prices.
Trump does not distinguish between strategic items and toilet paper. To him, trade deficits are trade deficits, and they are all equal.
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Tariffs are costly for companies that use the metal to make things, including recyclers.
Inter Asian business has exploded. Traffic on he shipping lanes is impressive!
How is the $1 trillion Chinese trade deficit getting financed? The relative value of the Yuan should be blowing up, causing Chinese products to be ever more expensive. This is the natural balancing act from an economics perspective. Why is this not working?
That was my question in the first comment. Hope you get an answer!
King dollar is still prevailing currency in world trade invoicing and foreign exchange transactions followed by the euro, yen, pound, Australian dollar, then CNY.
They are probably trading for resources, gold, and any other commodities that they can get. If China ships out finished goods they can get paid for them in whatever form that they would like.
Mish, I hope you watch Inside China Business channel on YT.
I hate “watching” news instead of reading and generally avoid YT. But, Kevin uses the video format wisely, by presenting charts while he speaks.
If you discover it’s a waste of your time, tell me. But please give it a try.
This is karma for 80 years of clueless mass consumer bliss. We were playing house (or partying, or whatever), and (at least implicitly) thinking God loved us, so he gave us so much abundance and personal diversion and self-satisfaction in perpetuity.
While China Industrialized, America Finacialized.
exactly the opposite.
Don’t know what you mean, but I’d say both were facilitated by the same Wall $treet people in the U.S.
Capital grows where money flows. Germany went from rag tag to industrial powerhouse because of US Bankers foreign investment pouring into Germany in the 1930s. Germany was supposed to be a stopgap against Bolshevism, but British Bankers thought differently. The US could prosper once again with the proper mindset of investors. Not sure boomers have that mindset. We may have to wait a few years for younger brighter minds to take the lead. Boomers don’t invest, they gamble.
Germany was an industrial powerhouse prior to WW I. The Germans were hardly a ragtag force in the 30s after Hitler’s capture of the German state by reforming its banking system.
Prior to wwii there was major US investment in Germany mostly designed to carpet bag on Germany after the Treaty of Versace. Ford owned Opel truck manufacturing, and ITT owned a significant part of Fucke-Wulf who built many FW fighters. During the war, so called ” Nuetral Countries” assisted in converting acquisitioned gold into hard currency for strategic trade with other so called neutral countries. It was largely a bankers war. Germany was despised for many of the same reasons Gadaffi was despised. He formed a currency not backed by Usury.
Building out global affordable clean tech. Meanwhile, we, having drifted for some years on paths of least resistance, have roused to launch into our grand campaign of self-isolation and self-dismantling, spiraling into the backwaters of one guy’s 1980s (whimsical, ossifying, declining, blathering, beautiful petroleum) mind. Pedal to the metal, the environment doesn’t exist when seen from the golden porch of a barricaded luxury property for one’s whole abnormal life.
Now, the once majestic and now diseased tree is beginning to fall to opportunistic predators, and break up. Its immune system is so daily confused, it is getting a fierce skill at attacking random parts of itself and its former ecosystem, and that means historic sudden gaps, opportunities for the most aggressive and shameless. History experienced as a sour and sad farce, familiar but now on a global scale never before seen, from a front row seat. Have a nice day!
Interesting article on gold market dynamics relative to global trading centers:
https://www.marketwatch.com/story/how-china-could-claim-a-much-bigger-slice-of-the-worlds-gold-trading-business-41313186?mod=mw_quote_news_topstories
I’m hoping that Mish weighs in on the gold markets again soon.
>
Farmers all over the world were hit by draught, fire and 50C temp.
If you ever watch an episode of Dragons Den or Shark Tank, you will notice that almost always, the products being promoted are being made in China. Consumers will vote with their wallets. We are also beyond the point where ‘Made in China’ was synonymous with ‘crap’. The stuff they make now is easily as good as Japan or Korea or Taiwan.
I buy small quantities of inexpensive items to resell. I’ve not found any suppliers of said products outside of China, and for the price point (inc shiping and tax), they are good quality.
For years WalMart has been telling inventors wanting to break into the WalMart supply chain to have their products made in China so they could “fit” into the WalMart price structure. We are reaping what we have sown. China will surpass America in every conceivable metric in the next 20 years or less. SEE: https://www.youtube.com/watch?v=ZNK3vNg13XA&t=1884s “Does the future belong to China”
As I mentioned at the beginning of the summer planting season, I did not plant corn or soy on my farm this season because of the trump tariffs. The tariffs caused a boycott of US products sporadically over the entire globe and a spike in fertilizer, pesticide and herbicide costs. In the midwest farming region fuel costs went up by about .40 cents per gallon thanks to Trumps war with our former great ally Canada.
As a direct result of this idiocy, trump has just had to spend $50 billion in additional emergency subsidies to farmers. The subsidies are just starting.
These emergency subsidies to farmers caused by the tariffs will exceed $200 billion for 2025 according to my estimates. Trumps economic illiteracy is only exceeded by his narcissism and pathologic behavior toward anyone he can bully.
Canada, Australia, the EU countries and of course the BRICS are all turning their backs on the US as “Trump folly #2” unfolds.
Got gold mining stocks? Global holdings of gold just passed global holdings of US Treasuries.
Elections have consequences.
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How much of that $50B and more is actually going to family farms as opposed to huge corporations that own farms?
Your lucky both parties will support farmers with bail outs and such. Not all segments of the economy will get that.
Elections do have consequences do you think farmers will abandon the republican party. Or since the get bailed out they will stay the course.
A lot of Papa and Puta, but Doug78 is gone. Only few sane commentators are left.
My/our definition of “sane” is different than yours.
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Most farmers don’t hate Trump as u do. Most farmers are old. The didn’t
understand that it’s a systemic change: growing stuff for Chinese pigs no longer exist. Read your charts: 1) in the first half of 2025 cargo shipping from ports spiked when US retailers and mfg preempted tariffs. They deflate after Oct break. 2) Xmas rush shipping by flight will not happen in 2025. 3) Stop bitching a round.
As i asked frosty will farmers support republicans (trump) because they will get bailed out anyway.
Fixated on personalities? Sometimes you are quite original and interesting on issues. If it is worth expressing, it is worth expressing to this audience. Echo chambers add little to anybody.
International cargo are flat since the Chinese New Year: Jan 28/Feb 4. May Day is behind us. Oct break is next. Rush Xmas shipping to the US, when most of the shipping are done, is GONE. In the first half of 2025 Containers at Chinese port included preempt tariffs to the US. After Oct break cargo shipping deflate. China destroyed US mfg jobs for decades. Now they destroy BRICKS jobs, ex Iran, which was destroyed by Trump. Instead of exporting “Death to America” the Ayatollah hanged over 1,000 people in 2025, 70 last week, bc Bibi didn’t kill the head of the snake on day #1.
The smell of hegemony in the morning. My curiosity extends to how entities domestic and foreign will feast on the parts of this creaking hegemon, and present a face to the public here. And of course, how that will feel and sound and be sold politically at the individual level; how quickly changes will come, and with what intensity and tone.
China is not doing itself any good with these tactics. Exporting goods at a loss does not benefit China.
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some times mish lost in woods!! who cares?
you are not in china, or Chinese person!
if someone gives you anything costing less than it s worth, YOU TAKE IT.
WOULD YOU TAKE GOLD FOR 3000$ PER OUNCE..???
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again,let the chips fall where they may . it is called human nature
let people in usa russia ussr israel iran china europe etc MAKE THEIR MISTAKES!!
alx
Many American corporations operate at losses for years before becoming immensely profitable. Amazon as the first example that comes to mind. I think China has a long term plan to benefit China and its’ people without regard to the rest of the planet. I think they will succeed.
China needs to expand in markets outside of the US. The US is simply an untrustworthy nation.
… and we built, irony of ironies, a “Chinese Wall” to isolate the world from us, and vice versa. Our system is the greatest, proclaimed the Emperor, and ushered China into a multi-century decline and vulnerability. If history ever rhymes, here is a distinct little couplet.
We hafta have great trade or no trade at all.
Importing subsidized goods and deflation from China in exchange for printed dollars that were then re-invested in US debt was not such a bad thing. It actually cost the Chinese money while our standard of living increased.
Our pedophile president fixed that with his stupid tariffs and now we get to pay more for less and finance our own debt while China grows its economy by selling goods and services to our former allies.
That is what happens when you elect a narcissistic idiot that bankrupted a casino and can not do basic mathematics.
Trump is an economic illiterate…
Be fair….Trump is mentally ill. Everything he does and everything he says stems from his mental illness. That he is stupid doesn’t help.
86/47
First paragraph fails to account for the present value of future costs.
The debt we now owe will cost far more in perpetual interest payments than the subsidized goods were worth.
We were sold out, and are now effectively paying an annual tribute to China and everyone else who owns Treasuries.
China is using the tribute money to buy up the world.
The U.S. was once the world’s strongest exporter and creditor nation. Now we are among the worst debtors.
Yeah I have 15 large boxes on a ship from Shenzhen in the Pacific somewhere right now. Took 3 fing months from entering production to shipping. Very annoying
What tariff rate are you paying for this shipment? And were there any equivalent US products?
Equivalent in function, or equivalent in costs?
Equivalent in both would be great, no shipping!
Seems like there are always “trade” offs.
Either. You answered your own question.
Tariffs are percentage based so the cheaper the goods, the cheaper the tariffs.
Yes. But my questions remain the same.
>> Trump in particular wants consumers to pay more and get less.
Yes, that’s what his oligarchs want. More profitable for them.
He was an upstart, not the corporate favorite, but then (as he found a critical mass in an era of device-addled insecure hopeful lunchbox guys) the least principled chieftains aligned around him, and it became a competitive spiral to align, and kiss the ring. It is a familiar cascade, but not a healthy one. The critics of FDR might have said similar, but the resource flow now is more exclusively (a great Trump word) to the top. Trump did the magic trick of attracting the poorer voter to the rich guys’ party (Limbaugh and FOX had pioneered, and he noticed, back when he was alert and nimble mentally), which induced the system to begin a process of self-immolation. The exclusive velvet rope is being deployed, you are inside or outside, and it is wrapped in barbed wire. Next up, lifeboats being joined to foreign cronies, to partition the spoils. Joe Lunchbox will be none the wiser, cheering his own disenfranchisement, as it happened in Russia.
A small matter…
>. He was an upstart, not the corporate favorite,
That’s how it looks and feels, even to me. But, when Hulk Hogan was a face and Andre the Giant a heel, was Andre less of a Vince McMahon favourite? Every show needs a variety of characters, whether it’s WWE or politics. Sometimes the “the people’s F.U. to the system” (Michael Moore’s characterization) “wins” (is selected)…And the serfs rejoice in their seats briefly. Meanwhile think tanks decide nearly all the same policies anyway. … So, after spending more time looking offstage, I’m not sure it matters.
How much of the exports to Africa and other impoverished places are “Buy now, pay later”? Make that pay never.
It is difficult for many African countries to afford much. Chinese companies
do offer heavily discounted pricing and financing, which helps a bit. Most of the imports are not consumer goods. Lots of solar panels, generators, and construction equipment. And some inexpensive automobiles.
You realize they’re all sitting on mountains of valuable natural resources yes? Africa is “impoverished” because Europe sacked them for ~200 years and continues to meddle with them, not by fault of their own.
Yep. African countries main exports to China are natural resources, which are then used to make finished goods, which are sold back at much higher prices.
Same as we do with Canada. Though Trump is doing everything he can to mess with that great relationship.
Neo-imperial formula. Europe was built and gilt upon it.
Africa was sitting on valuable natural resources for centuries before the Europeans arrived and were a lot more impoverished than they are now. There weren’t even any road before 1800. Africa has ever had a lot of cultural problems that contribute to their perennial poverty.
Plus, google, “What is the average IQ of Africans?” The answer might contribute one possible explanation to their lack of economic development….
Their populations were stable until the missionaries destabilized indigenous cultures. Now over-population plagues the continent and tribal warfare over basic resources has become endemic. Suffering has multiplied many times over and now can make a case that things are far worse than if they had been left to their own cultural identity.
Indigenous peoples were in equilibrium, yes. That may have involved a lot of small-bore conflict all along, only because they lacked the tech to do otherwise. Like animals, the human species exploits whatever it is capable of (rich or poor), and turns that into maximum genetic (and cultural) copies of itself. It (a fatal design defect I think) externalizes all negative consequences, heedlessly, in its core algorithmic mission (above). It does this competitively, with whatever means it has. Our system exploited those, so I think we owe it to ourselves to own it. Our cool stuff now is the progeny of that, and sadly, is our collective demise as well. Said a convinced neo-Malthusian. It cannot regulate itself, because it is trapped in a human ego.
Are you talking the average across Africa, or are you removing the Boers and other privileged white classes from your calcs? I’m assuming “Africa” is code for blacks and I’d like to see your research be thorough enough to answer off the top of your head, because you know, you checked your sources and such.
That’s a great trade for the well-positioned would-be hegemon. Less costly than conquest by war. Lock the customer into systems. Exhibit A: the US dollar for decades.
huh? McCown: U.S. Container Imports Face Historic Decline as Tariff Effects Take Hold
https://gcaptain.com/mccown-u-s-container-imports-face-historic-decline-as-tariff-effects-take-hold/
Tariff destroys US’s share of global consumption. The rest of world is now consuming more and becomes richer than Americans.
What?
The U.S. Government keeps giving out money to its citizens who then spend it on goods from China so what does the government have to do next. It has to even borrow more money and devalue the dollar and then people complain about inflation?
I almost think Tariffs were a way to say, I am at least going to get a consumption kick back on some of the money I gave you if your going to send it to China to buy gadgets. No country can continue to have an increasing trade deficit that last forever with another country. It eventually leads to rising inflation.
Think about it. What percentage of those Social Security checks finds it way to China or India when those retirees buy cloths, household goods, or medicine.
All those middle class Americans who have been shopping at Walmart were shopping their way out of a job. Now some of the only jobs in small towns are at the local Walmart or Dollar General.
That is a brilliant angle, methinks. Citizens will not vote to be taxed for what they want “free.” It has become politically impossible for entitled Americans: shift the bill to someone else, and pretend it doesn’t exist. So here we are.
People are complaining that tariffs are causing a lot of the deflation but fail to mention the 10% drop in the valuation of the USD over the past 9 months. Well, that theoretically means all imports costs 10% more.
I just love “whatever supports my gaslighting thesis” articles full of cherrypicked stats from opaque sources.
The Port of LA data, which is publicly accessible, shows inbound traffic down only slightly and outbound traffic up. No historic decline. No meaningful tariff effects either.
The whole world is switching to Yuan especially with China swapping out USD debts for Yuan debts for all nations of the world. The Chinese victory is so total they might start a nuclear war is their last attempt to hold on to the world.
Any data to support that opinion? I don’t see “Yuan debts” being a big thing outside of China. Within China they’ve got huge problems due to too many such debts.
Outside of China, if you don’t pay your debt on the nice port or road they built you, they take possession and charge you. But then everyone does that.
China’s electric cars are the shit…military equipment exports are soaring. Quite a few countries can now put produce us in modern drone and missile manufacturing. We need to be a lot more strategic about trade and manufacturing investment abroad than what we have been over the last three decades. It may be too late, China has already eaten our lunch. We still have time to leverage our massive consumer base but current policies are in the process of killing that too.
Consumers are beggars. There is no leverage but liability.
Interesting, a BYD electric car just broke the world speed record for any production car. https://www.reddit.com/r/Damnthatsinteresting/comments/1nopln3/byd_has_broken_the_speed_record_for_a_production/
It is really hard to be innovative in the manufacturing industry when your country does not manufacture anything. We should not be surprised at China’s gain. But we certainly have many more talented baristas. There seems to be a drive through coffee shop on every corner now.
That was somewhat the Palantir CEO’s critique in his recent book.
It is really hard ro be innovative when a nation with lower production costs simply steals your idea.
The long term goal is to get other nations to abandon enough large scale manufacturing operations that could then be used for national defense. Communists know it’s a lot easier to conquer people / nations if they cannot defend themselves.
Capitalists know it’s a lot easier to conquer people / nations if they cannot defend themselves. Everyone knows it.
Sales of Chinese PHEVs to Europe are surging.
https://finance.yahoo.com/news/europes-plug-hybrid-boom-helps-125232094.html
I think I have to break with you here Mish, this is a very good play from China in my book. Yes it’s a hit to them now, but it’s one they can and will eat. In the long run they stand to gain the kind of stranglehold we used to have on the world before our country turned stupid.
If China becomes the kingpin of the world post the ongoing US-rumpicication, they can suddenly tighten the noose and get whatever the hell they want from most of the world. The only way to lose that position once you have it is be like us and start pissing off the entire world at once instead of bullying them piecemeal.
China shouldn’t have a chance to pull this off, but we keep handing them free wins by acting like an uninvestible dumpster fire.
>> China shouldn’t have a chance to pull this off, but
Good luck to them. If they continue the way they’re doing it now, then the world will be full of consumer goods, high-speed rail, electric power plants, and even food. (Yes, even food.). Much better than a world filled with proxy wars, genocide, unpayable debt, and various broken promises.
I don’t wish ill on them, I just wish America was able to learn its lesson about being disgusting to nonwhites without having to collapse itself doing the same thing as last time. I’m a patriot through and through, but it’s impossible not to feel embarrassed watching that standup act at the UN today.
You do realise that Trump is only at the UN because supposedly high IQ, wonderfully educated Americans voted for him.
I share your sentiment. Sigh….I just don’t see anything good for the next few years.
I wonder whether China’s trade deficit reflects “squeezing of the peasants” to allow elites to buy up international wealth?
There’s clearly strong demand from Chinese elites for foreign assets. That could be a grand geopolitical strategy to “own the world”, or maybe simply because the domestic currency and markets are not trusted to retain value. Or both?
One mystery to me is that if the funds from the trade imbalance were remaining inside China, there should by now be strong effects on their currency. But the Yuan vs Dollar hasn’t moved all that much over the years. Always 6 or 7 CNY per USD.