China Is Exporting More & Making Cheap Products Cheaper
China is flooding global markets, including the U.S., with cheap exports across various industries. Chinese factories are producing far more goods than the domestic market can absorb, resulting in a surplus that is being exported at low prices to markets in the U.S. and Europe. This overcapacity issue affects multiple sectors, including steel, electric vehicles, solar panels, computer chips, and other manufactured products, as China has rapidly expanded its production capabilities.
China’s global trade surplus in goods soared to around $900 billion in 2022, more than double the pre-pandemic level, highlighting the scale of oversupply. Factors such as China’s slowing economy, prolonged property slump, and shifts in consumer spending patterns have exacerbated the overcapacity problem.
The U.S., the European Union, and other trading partners accuse China of unfair trade practices, including subsidies, intellectual property theft, and forced technology transfers, which have fueled the overcapacity trend. The Chinese government has been subsidizing companies to export more competitively and aggressively.
In response, the current U.S. administration announced major tariff hikes on $18 billion worth of Chinese imports, including electric vehicles, solar cells, semiconductors, and some medical supplies, to counter the deluge of subsidized Chinese products. The previous administration imposed tariffs of 25% on $300 billion worth of Chinese goods to curb the import of such products from China.
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- Tony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management
