Following wave of Trump tariffs, China dominates trade with cheap exports

Following the massive wave of import duties by the Trump administration, the People's Republic of China used newfound trade imbalances to overwhelm global markets with cheap products, solidifying its economic dominance internationally.

The Chinese flag being raised in a grand gathering in Beijing, China, Photo/Xinhua.

On September 22nd, Bloomberg released an updated projection for the Chinese trade output, showing that the Asian economic behemoth will have amassed a whopping $1.2 trillion trade surplus by the end of the year, the highest trade surplus the nation has ever experienced thus far.

Bloomberg reported their basis of the projection to be strong and resilient exports even under American tariffs, and China gaining new market share in places hit hard by Trump-related American tariffs such as India, Africa, and Southeast Asia. Some analysts, such as Bank of America in Bezinga, believe this surplus is being driven by non-American markets, despite concern regarding American tariffs.

However, this rising datapoint has also been contributed by the rampant retreat away from American-made products toward cheaper Chinese or Indian alternatives; many of these nations implemented so-called retaliatory tariffs against the United States in response to Trump's import duty barrage, therefore surging the prices of U.S. exports. Even worse, the U.S. trade deficit is not collapsing like what President Trump had hoped, but instead is worsening.

And, Chinese manufacturers are adapting to the loss of American accessibility. Chinese exports to India, Africa, and Southeast Asia have surged and/or reached all-time highs.

"The subdued response is probably informed by ongoing US trade negotiations," argued Christopher Beddor, deputy China research director at Gavekal Dragonomics. "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."

A key aspect to the surplus was also overcapacity, which the Chinese have been able to sustain as it continues to ramp out products market wide. Adam Wolfe, an emerging markets economist at Absolute Strategy Research, said, "I suppose overcapacity can be in the eye of the beholder in many ways… But I think it’s hard to argue that China doesn’t have a structural excess capacity issue when you look at China’s own industrial data… The problem is that, when demand for these sectors declined, there was no market mechanism to clear up that excess capacity. These companies are being kept alive by local government subsidies… And it’s probably that metric that really highlights the issue of excess capacity; that firms can no longer make a profit in the domestic market in China."

This is very much a merited viewpoint. As the housing crisis in China sees no end, less money is held in the pockets of domestic Chinese individuals, resulting in companies shifting focus from satisfying domestic consumer demand to taking advantage of global trade imbalances and barriers to export en masse.