China Floods the World With Cheap Exports After Trump’s Tariffs

Economic

Summary:

China’s exports surged despite U.S. tariffs, pushing a \$1.2T surplus as sales to India, Africa, and Southeast Asia hit records. Most nations avoid retaliation, giving Beijing room to expand.

President Xi Jinping’s export engine has proved unstoppable during five months of sky-high US tariffs, sending China toward a record $1.2 trillion trade surplus.

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.

China Floods the World With Cheap Exports After Trump’s Tariffs_1

Chinese Exports Hitting New Records in Many Markets | Shipments are exceeding the pandemic era highs for many destinations

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.

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’s giving Beijing breathing room from US levies at heights economists previously predicted would halve the nation's annual growth rate.

“The subdued response is probably informed by ongoing US trade negotiations,” said 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.”

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.

Beijing is using both diplomatic charm and economic threats to prevent countries from taking outright retaliation. Earlier this month, China’s president 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, Trump is pressuring NATO nations to impose tariffs up to 100% on China over its support for Russia.

said in July. The state-run People’s Daily newspaper on its social media account last month hit back against Western criticisms of “dumping,” arguing that China’s exporters don’t sell below cost.

If Trump does corral other countries to gang up on China, it’ll make dealing with internal challenges such as a prolonged property crash and an aging population harder, according to Chang Shu and David Qu of Bloomberg Economics. “Beijing will likely hit back with reciprocal tariffs immediately, but that risks alienating partners at a time when it critically needs allies,” they said. “Over time, it may also encourage firms to localize production in partner countries.”

China Floods the World With Cheap Exports After Trump’s Tariffs_2

Chinese Exports Triggered Record Pushback Last Year | Trade remedy cases filed in 2025 are third-highest ever

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 Floods the World With Cheap Exports After Trump’s Tariffs_3

China's Ports Are Busier Than Ever | International cargo flights at a post-pandemic record

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.

Ultimately, it’s 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 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.

China Floods the World With Cheap Exports After Trump’s Tariffs_4

Global Demand for Chinese Goods Still Rising | Exports to the US fall, but are hitting records to the rest of the world

Cambodia’s central bank governor Chea Serey was candid about the balancing act smaller economies reliant on Beijing are having to perform. “We do import a lot from China,” she told Bloomberg Television earlier this month, 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 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.

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

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.”

Source:Bloomberg

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Manuel

Central Bank

Political

President Donald Trump's actions are raising questions about the continued independence of U.S. monetary policy and have also dented the safe haven appeal of the U.S. dollar, Bank of Canada Governor Tiff Macklem said on Tuesday.

The observations mark the first time Macklem has commented on Trump's attempts to influence the Federal Reserve.

In the last few months, Trump has cranked up his demands for a rate cut, tried to remove one of the Fed's governors and repeatedly insisted that chair Jerome Powell resign.

"President Trump's attempts to influence the Federal Reserve are raising questions about the continued independence of U.S. monetary policy," Macklem told the Saskatoon Chamber of Commerce in the western province of Saskatchewan.

Macklem said the new global uncertainty, triggered in part by tariffs, underscored the need for Canada to boost productivity and find new foreign markets.

"The question now is whether U.S. dominance in global financial flows will ebb as the United States pulls back from trade and runs large fiscal deficits. The recent performance of the U.S. dollar may be telling us something," he said.

The greenback, he noted, was losing its appeal, falling almost 10% since Trump unleashed a barrage of tariffs globally in April. This, Macklem said, had called the dollar's safe haven role into question.

"For now, the greenback remains dominant, and — without a clear alternative — I suspect it will remain the global reserve currency for the foreseeable future. But for many, its value as a hedge in times of stress has been dented," he said.

He said the shifting trade equation with the U.S. had immense ramifications for Canada.

"We can't afford to wait this out," he said, adding that Canadian businesses as well as political and economic leaders would need to chart a new course.

"We should have been making these changes 15 years ago. But the next best time is now," he said.

Canada has long suffered from anemic productivity which economists and businesses say is helping fuel inflation.

"We need to diversify our trade by growing our internal market and finding new overseas markets. And we need to improve our productivity and make ourselves more attractive to investors," Macklem said.

Canada's economy will work less efficiently, costs will go up and incomes will shrink due to increased trade friction with the U.S., he said, but noted monetary policy would not be able to soften these impacts.

"Monetary policy cannot undo the efficiency costs of U.S. tariffs ... nor can counter-cyclical fiscal stimulus," he said, adding that only positive structural reform could offset that.

Source: Reuters

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Kevin Du

Economic

President Donald Trump's approval ticked slightly lower in recent weeks as Americans worried about the health of the U.S. economy and the Republican's ability to contain rising prices, according to a new Reuters/Ipsos poll.

The three-day poll, which closed on Sunday, showed 41% of respondents approved of Trump's performance as president, down from 42% in a September 5-9 poll.

Some 54% of people surveyed said the national economy was on the wrong track, up from 53% in an August poll and 52% in July.

Only 35% of poll respondents approved of Trump's stewardship over the economy, and 28% gave him a thumbs up on his handling of their cost of living, with both readings slightly lower than in previous polls. Trump returned to the White House this year after promising in his election campaign last year to fix the economy.

U.S. job growth weakened sharply in August when the unemployment rate rose to a nearly four-year high at 4.3%, while inflation also accelerated last month.

Public concerns over the economy were higher earlier in the year when Trump was threatening to aggressively impose tariffs on imported goods, sparking sharp declines in stock market values.

AMERICANS SPLIT ON TACKLING EXTREMISM

Following this month's assassination of conservative activist Charlie Kirk, Trump has focused much of his rhetoric on the alleged danger his political opponents pose for the nation, telling a Kirk memorial on Sunday that "the violence comes largely from the left."

Reuters/Ipsos polls this year have persistently shown that Americans view political extremism as the country's biggest problem. Some 28% of respondents in the most recent poll picked it as the top issue, compared to 16% who picked the economy. Asked which party had a better plan for tackling extremism, poll respondents were split almost evenly, with 30% picking Republicans, 26% saying Democrats were better and the rest saying either neither was better or they weren't sure.

While the economy has weighed on Trump's approval ratings, poll respondents more often picked the Republican Party over the Democratic Party - 34% to 24% - for managing economic policy.

Trump's approval rating continues to be buoyed by the relative popularity of his immigration policies, which include mass arrests of people suspected of not being in the country legally. Some 42% of poll respondents gave Trump a thumbs up on immigration, unchanged from earlier this month. It was Trump's highest rating on any single issue in the Reuters/Ipsos poll.

The poll of 1,019 people was conducted online and nationwide. It had a margin of error of 3 percentage points. Beginning this month, Reuters/Ipsos polls have included a slight methodological change, no longer giving respondents the option to say they were “not sure” about whether they approved or disapproved of the president’s overall job performance.

Source: Reuters

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Adam

Economic

The Organisation for Economic Co-operation and Development upgraded its global economic growth forecast on Tuesday, with many economies appearing more resilient than expected so far this year.

The OECD now expects global growth of 3.2% this year, compared to the 2.9% expansion it had forecast in June. Expectations for 2026 were unchanged at 2.9%. This would mark a slowdown from the 3.3% growth seen in 2024.

Growth expectations for the U.S. were also lifted, to 1.8% for 2025, compared to June’s 1.6% estimate. This still marks a significant fall from 2024′s 2.8% growth, however. The organization forecasts 1.5% growth for the U.S. in 2026.

“Global growth was more resilient than anticipated in the first half of 2025, especially in many emerging-market economies,” the organisation said in a new report.

“Industrial production and trade were supported by front-loading ahead of higher tariffs. Strong AI-related investment boosted outcomes in the United States and fiscal support in China outweighed the drag from trade headwinds and property market weakness,” it noted.

Tariff impact still to come

The OECD warned, however, that “significant risks to the economic outlook remain,” as investment and trade continue to be hit by high levels of policy uncertainty and elevated tariffs.

Sweeping duties on goods entering the U.S. came into effect in August after months of policy changes, temporary pauses, and threats from U.S. President Donald Trump.

Countries and regions around the world now face tariff rates as high as 50% on their exports to the U.S., with some still trying to negotiate trade frameworks.

“US bilateral tariff rates have increased on almost all countries since May. The overall effective US tariff rate rose to an estimated 19.5% at the end of August, the highest rate since 1933,” the OECD said.

“The full effects of tariff increases have yet to be felt – with many changes being phased in over time and companies initially absorbing some tariff increases through margins – but are becoming increasingly visible in spending choices, labour markets and consumer prices,” it added.

Labour markets are showing signs of softening as some countries see higher unemployment and fewer job openings, according to the report, while the disinflation process appears to have flattened.

The OECD now expects headline inflation to amount to 3.4% across G20 countries in 2025, slightly lower than June’s 3.6% projection. Inflation expectations for the U.S. were revised down more sharply, with the OECD now forecasting price rises of 2.7% in 2025, down from the previous 3.2% forecast.

Looking ahead, further tariff increases and a return of inflationary pressures were flagged in the organization’s report as two key risks, alongside growing concerns about the fiscal situation and the possibility of repricing in financial markets.

“High and volatile crypto-asset valuations also raise financial stability risks given growing interconnectedness with the traditional financial system. On the upside, reductions in trade restrictions or faster development and adoption of artificial intelligence technologies could strengthen growth prospects,” the OECD noted.

Source:cnbc

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Adam

Economic

Commodity

The US-China dispute over Beijing’s control of rare earth supplies has yet to be resolved, the head of a visiting US congressional delegation said after meeting Chinese officials, signaling a key irritant persists in bilateral relations.

Representative Adam Smith described continuing challenges on the matter in a press briefing on Tuesday in the Chinese capital, where he’s leading the first official visit by US House lawmakers since 2019 as relations steady before a potential meeting between the countries’ presidents.

“I don’t think we resolved the rare earth question,” Smith said, without specifying what the sticking points are. “I think that that still needs to be worked on.”

China dominates the global supply and processing of the minerals, which are vital for everything from electric vehicles to advanced weaponry. Beijing has used its position as a strategic lever as trade tensions with the Trump administration escalated earlier this year.

The two governments reached a framework agreement in June that includes a Chinese commitment to review applications for shipping rare earth magnets, although few details of the deal have been disclosed. US Trade Representative Jamieson Greer last week said supplies to his country had “bounced back up significantly,” although European companies have complained about shortages that threaten to halt production.

Smith also struck a note of caution in response to a reporter’s question about whether Beijing-based ByteDance Ltd. will have any role in maintaining the app’s algorithm in the US. Citing privacy and security concerns, he said the matter has “not been 100% resolved,” while adding that he wasn’t privy to the negotiations.

The US and China are nearing an agreement to hive off the US operations of social media platform TikTok to a consortium that includes software giant Oracle Corp. Under the spin-off arrangement being discussed, TikTok will be majority-owned and controlled by Americans, according to White House Press Secretary Karoline Leavitt. Many of the finer details of the agreement have yet to be made public.

Joined by US Ambassador to China David Perdue, the delegation’s visit may build more goodwill ahead of a possible sitdown between US President Donald Trump and Chinese President Xi Jinping next month in South Korea.

The world’s two largest economies are in the final stages of negotiations for a “huge” Boeing Co. aircraft order, Perdue said at the briefing. Such a deal, which has been years in the making, would be the centerpiece of a trade agreement between the two nations but has been contingent on an easing in tensions.

On the security front, Smith, the top Democrat on the House Armed Services Committee, urged Beijing to engage in talks over its “rapidly growing nuclear arsenal” to prevent miscalculation.

“When you’re getting up into the hundreds, close to 1,000 on nuclear weapons, it’s time to start having a conversation about it to make sure that we understand each other,” Smith said. He stressed the need for better military-to-military dialogue, a message he delivered in meetings with Chinese officials including Premier Li Qiang since the delegation arrived on Sunday.

During the trip, the US delegation has also discussed the flow of fentanyl and called for fair access to China’s market for US firms.

The group met with National People’s Congress Chairman Zhao Leji and Foreign Minister Wang Yi later on Tuesday.

Wang praised the exchanges between the two heads of state for steadying relations and called on both sides to uphold them.

“Their conversations have set the tone and chartered the course for the bilateral relationship. In the recent period, this relationship has stabilized,” Wang said in his opening remarks. “This is not easy. We need to preserve this.”

Source: Bloomberg

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Devin

Central Bank

Federal Reserve Chairman Jerome Powell said there is “no risk-free path” for the central bank's next policy move as inflation remains elevated but the job market weakens.

It's "a challenging situation," Powell said during a speech in Rhode Island on Tuesday, reiterating that the Fed must balance its dual goals of maximum employment and price stability.

"Two-sided risks mean that there is no risk-free path,” he added.

Powell’s comments repeated many of the same points he made last Wednesday after the central bank voted to cut interest rates 25 basis points and officials penciled in a median estimate of two more 25 basis point cuts by year-end.

The chairman in in a difficult spot, trying to maintain consensus within the Fed at a time when policymakers are divided about the future path of monetary policy and the White House is applying maximum pressure on the Fed to bring rates down further.

Stephen Miran, the newest Federal Reserve governor, said Monday in a speech that he believes benchmark interest rates should be around two percentage points lower than their current 4% to 4.25% range. He argued that today’s rates are too restrictive and could lead to more layoffs and worsening unemployment levels.

Miran, who is on a leave of absence from his White House job while serving as the newest Fed governor, was the lone dissenter last week when the Fed voted to cut rates by a quarter point. He preferred a larger 50 basis point cut.

The Fed has a dual mandate to keep inflation in check while maximizing employment, and an economic environment where the labor market is weakening but inflation remains elevated leaves the Fed without a clear interest rate policy path.

Cutting rates can help spur hiring, but may fuel inflation further. Raising rates can help tamp down inflation, but comes with added risks for the job market.

While signs of a weakening labor market spurred the most recent cut, many Fed officials are urging caution around further rate cuts because inflation remains above the Fed’s 2% target.

The Personal Consumption Expenditures index, the Fed’s preferred inflation measure, stands at 2.9%. A new reading covering August data will be released on Friday.

Powell reiterated that weakening employment shifted the balance of risks away from inflation and led to last week’s cut. He said he views the current policy stance as “modestly restrictive” and said Fed policy “is not on a preset course” and the central bank will continue to respond to new economic data, outlook changes, and the balance of risks.

Some Fed officials this week have reiterated their worries about inflation. St. Louis Fed president Alberto Musalem said Monday he supported cutting interest rates last week as a “precautionary move” to guard against the risk of higher unemployment, but cautioned there is limited room for further rate cuts before risking a boost in inflation.

Atlanta Fed President Raphael Bostic also told The Wall Street Journal in an interview published Monday that inflation concerns would make him hesitant to support another rate cut in October.

“I am concerned about the inflation that has been too high for a long time,” Bostic told the Journal. The Fed’s next meeting is Oct. 28-29.

The Fed needs to be "very cautious" in removing restrictive policy with inflation still above the central bank's 2% target, Cleveland Fed President Beth Hammack added on Monday.

Source: Yahoo Finance

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Adam

Commodity

The general line of thinking in markets this year has been that with Trump's erratic policies and tariffs, it is all serving to bite at the US economy and the dollar. I admit, even I have been sold on the narrative that a weaker dollar has been in part driven by a shake up in confidence and credibility to the currency in the past few months.

But besides the evidence we can see in FX flows, there's another story in the background that is worth taking notice of.

The latest Treasury International Capital (TIC) data for July actually showed that foreign demand for US-denominated assets remain strong. That despite alleged concerns about tariffs and the administration's policy incoherence in handling many things, including the whole Fed ordeal.

Now, the monthly data hasn't quite yet captured the dovish pivot by the Fed itself but after the rate cut decision last week, it's not to say that the Fed has leaned overly dovish in any case.

So, let's take a look at what some of the TIC data is saying.

For one, foreign investors ended up with net purchases of long-term US securities worth $78.8 billion. The year-to-date figure shows net purchases worth $865.1 billion. For some context, the 2024 figure showed net purchases worth $1,180.4 billion. So, it's not to say that there has been a material slowing down in investor appetite for US assets.

The large chunk of those buying for July were in Treasury bonds/notes and corporate bonds/notes, amounting to $85.4 billion. That is partially offset by equity outflows on the month, which totaled to $16.2 billion. Now, are investors moving away from US stocks? Not quite.

The net outflow in July comes after record inflows during May and June, which amounted to $115.8 billion and $163.1 billion respectively. And we all know, one month doesn't make a trend.

Looking into more details, total foreign holdings of Treasuries also moved up to hit a record $9.2 trillion. And of note, EU holdings of US-denominated assets also hit a record of $8.9 trillion in July. (h/t @ Credit Argicole)

As such, that continues to underscore the strong appetite for US assets even during these supposed testing times for the dollar and the US economy.

So, what does this all tell us?

The dollar may be softer this year amid poor market sentiment and a confidence struggle in general. But if and when these headwinds come to pass, the underlying flows suggest that any potential rebound in the dollar is one that is going to carry a large weight supported by the still strong investor appetite for US assets.

And if anything else, this does shoot down the thinking that foreign investors are moving away from the dollar and the US. In fact, it's far from the reality as seen above.

Source: investinglive

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China Floods the World With Cheap Exports After Trump’s Tariffs

Chinese Exports Hitting New Records in Many Markets | Shipments are exceeding the pandemic era highs for many destinations

Chinese Exports Triggered Record Pushback Last Year | Trade remedy cases filed in 2025 are third-highest ever

China's Ports Are Busier Than Ever | International cargo flights at a post-pandemic record

Global Demand for Chinese Goods Still Rising | Exports to the US fall, but are hitting records to the rest of the world

Source:Bloomberg

Bank of Canada Head: Trump is Raising Questions About Independence of US Monetary Policy

Source: Reuters

Trump's Approval Dips As Americans Worry About Economy, Reuters/Ipsos Poll Finds

AMERICANS SPLIT ON TACKLING EXTREMISM

Source: Reuters

U.S. and global growth forecast lifted by OECD as economies surprise to the upside

Source:cnbc

China Rare Earths Issue Remains Unresolved, US Lawmaker Says

Source: Bloomberg

Fed's Powell Sees 'no Risk-free Path' For Interest Rates After Central Bank's Cut Last Week

Source: Yahoo Finance

Are capital flows really moving away from the US this year?

Source: investinglive

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