One of the consequences of US tariffs is that China\u2019s manufacturing machine has shifted its exports around the world, and no one is complaining more than Europe. Authorities there have launched dozens of anti-dumping and anti-subsidy probes as a torrent of cheap Chinese products swamps EU markets, including EVs, medical devices, and tires. European Commission President Ursula von der Leyen warns that trade relations with China have reached a \u201cclear inflection point.\u201d<\/p>\n
Yet by far the more consequential \u201cChina Shock\u201d is reverberating around emerging economies, especially China\u2019s neighbors. These countries are struggling to cope with an export juggernaut \u2014 one that is hyper-competitive both at the frontiers of technology, and at the trailing edge.<\/p>\n
China is a superpower with sweatshops: In southern Guangdong province, the world\u2019s factory floor, robot arms help assemble batteries for BYD, drones for DJI, and 5G network gear for Huawei, while in cramped workshops nearby, young women from the countryside cut and stitch rock-bottom priced clothing \u2014 $12 jackets, $6 skirts, and T-shirts for as little as $2.<\/p>\n
This devastatingly effective combination has enabled China to export its way out of a prolonged post-COVID economic slump that exacerbated already massive industrial overcapacity. Now, as US President Donald Trump\u2019s tariffs kick in, its export machine has kicked into higher gear: China\u2019s trade surplus this year is on track to soar to a record $1.2 trillion.<\/p>\n
China is now competing head-on not just against other advanced economies but the most vulnerable ones. In effect, it is blocking the ladder to prosperity for countries in the Global South.<\/p>\n
Indonesia lost 250,000 jobs in its backbone textile industry between 2022 and 2024 because of a deluge of Chinese imports, according to the Indonesia Fiber and Filament Yarn Producer Association \u2014 and another half-million may now be at risk. Some of the low-end merchandise arrives in small packages from online retailers; other goods are smuggled in to avoid import duties. This year, one of Indonesia\u2019s largest garment enterprises went bankrupt, closing its doors on more than 10,000 workers.<\/p>\n
Even weavers of traditional Indonesian batik \u2014 a fabric made through a dyeing technique using wax \u2014 have given up trying to compete with cheap Chinese knock-offs.<\/p>\n
In Thailand, the Chinese export tsunami has precipitated a crisis among smaller firms making car parts, electrical equipment, and consumer goods, stoking fears of deindustrialization. Village-based cottage industries are particularly at risk; for example, makers of hand-painted ceramic \u201crooster\u201d bowls have been idled en masse by Chinese fakes that sell for one fifth of the price.<\/p>\n
China\u2019s exports to Southeast Asia are now larger than those to the US. Malaysia\u2019s semiconductor industry, a key growth-engine, is feeling the pressure. Electronics manufacturers in the Philippines are struggling. Vietnam has erected tariff barriers to Chinese hot-rolled coil steel products.<\/p>\n
Beijing styles itself as a partner for the developing world, a force for economic and social progress from Asia to Latin America and Africa, in contrast to an America that has turned protectionist.<\/p>\n
But its economic model breaks with a centuries-old pattern in which wealthy countries cede their low-skill industries to economies making their way up in the world. Textiles and apparel fueled the industrial rise of Britain, then the US, and eventually \u2014 in the 1960s \u2014 the \u201cTiger\u201d economies of Asia; clattering looms and whirring sewing machines helped make Hong Kong, South Korea, and Taiwan wealthy. In turn, these Asian economies bequeathed textiles and other light industries to China.<\/p>\n
But China is not letting go. Alone among industrialized economies, it has held on to all the basic industries that helped it clamber out of poverty, and at both ends of the industrial spectrum it leverages its unmatched scale, unsurpassed infrastructure, and huge state subsidies to drive down prices and crush competitors.<\/p>\n