China Shock 2.0: China’s Industrial Machine Cannot Stop

For years, global attention focused on U.S. tariff battles and Donald Trump’s protectionist policies as threats to world trade. But another pressure is building from the opposite direction: a flood of cheap Chinese goods into international markets.

China’s enormous production capacity, combined with weak domestic consumption, has made companies increasingly dependent on overseas buyers. The problem, according to the article, is that the world’s ability to absorb those products is nearing its limit. Michael Froman, a former U.S. trade representative who now serves as president of the Council on Foreign Relations, warned that China’s industrial and export-led growth model is reaching a dead end.

“Global demand for China’s excess production capacity is approaching a critical point,” Froman wrote in Foreign Affairs. The warning comes as the gap between global economic growth and China’s trade expansion grows more visible. The International Monetary Fund expects global gross domestic product to grow by about 3.1% this year, while China’s trade surplus jumped more than 20% in early 2026.

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Global demand for China’s excess production capacity is approaching a critical point.

China recorded a trade surplus of about $1.2 trillion the previous year, the largest since records began. Its surplus grew about three times faster than global merchandise trade. That imbalance is now provoking resistance. The United States has raised tariffs on various Chinese goods, and the Trump administration has made tariffs a central instrument of its “Liberation Day” trade agenda.

Resistance is also emerging in the European Union, traditionally one of the strongest supporters of open markets. Froman said more countries were becoming unwilling to accept the industrial consequences of an influx of cheap Chinese imports. “Political appetite for accepting the deindustrialization and strategic dependence that result from a flood of Chinese imports is limited and shrinking,” he said. If the trend continues, protectionism will spread and Chinese manufacturers will lose access to markets that have served as outlets for their excess production. The article also points to China’s cost advantage, saying Chinese companies can sell goods about 30% cheaper than competitors in other countries, aided by an undervalued currency and state subsidies.

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Political appetite for accepting the deindustrialization and strategic dependence that result from a flood of Chinese imports is limited and shrinking.