The numbers come first.
Global GDP growth is running around 3.1% this year, according to the International Monetary Fund. China's trade surplus, by contrast, expanded more than 20% in early 2026, after Beijing posted a $1.2 trillion trade surplus in 2025 — the largest in recorded history, growing three times faster than global goods trade, according to Michael Froman, a former U.S. Trade Representative and current president of the Council on Foreign Relations, writing in Foreign Affairs.
Trump hiked tariffs on China last year and made it the centerpiece of his 'Liberation Day' trade war. Even the European Union, long a defender of open markets, is now racing to erect trade barriers against Chinese goods.
'The political appetite for accepting the deindustrialization and critical dependencies that come with the flood of Chinese imports is finite and shrinking,' Froman wrote. 'As these trends continue, protectionism is likely to rise, cutting off Chinese manufacturers' market access.'
Helped by an undervalued currency, Chinese companies charge as much as 30% less than rivals elsewhere. State subsidies and mandates from Beijing have encouraged excess production and cutthroat price wars, leaving nearly a third of Chinese industrial firms operating at a loss.
'The result is an industrial machine that cannot stop and cannot slow down — but that, owing to the limits of demand, cannot keep going,' Froman wrote.
Beijing has acknowledged it must rebalance away from exports and industry, taking some steps to support consumer spending and cracking down on so-called involution, or over-competition. But Froman argued China can't fully abandon its export-led growth model because it functions as both economic grand strategy and political project.
He warned the fallout would include fragile businesses failing en masse, state-owned banks recording losses on 'zombie firms,' cascading defaults in local government financing vehicles, and collapsing provincial revenues. Commodity-exporting economies and other developing nations that depend on China as a top trading partner would also take a hit as demand for raw materials dries up.
'Even if the next crisis is made in China, the cleanup is likely to fall, as it often does, on the United States and the institutions it anchors,' Froman wrote.
Other economists have raised similar alarms. Apollo chief economist Torsten Slok has flagged a 'China Shock 2.0,' noting Beijing is now exporting the advanced products that developed economies once expected to dominate at home. Federal Reserve economists reached a similar conclusion in May, finding China's export boom has shifted from labor-intensive goods in the early 2000s to capital- and tech-intensive industries today. Former Treasury official Brad Setser warned last year that China's export flood could pose an even bigger threat to the global economy than Trump's tariffs. Imports of manufactured goods into China, meanwhile, have grown by an average of just $15 billion annually over the last six years — essentially unchanged.
Capital rewards clear rules, and Beijing's model runs on the opposite: state subsidies, currency management, and mandates that keep 'zombie firms' alive at the expense of market discipline. The bill for that distortion doesn't stay in China. It shows up in shuttered factories from Europe to Latin America and, eventually, in the American institutions asked to backstop the next crisis.
Trump's tariff wall looks less like protectionism for its own sake and more like a defensive line against a growth model that never had to answer to a market. The taxpayer should watch closely who ends up paying for Beijing's excess capacity.
