China’s exporters are testing the limits of the global trading system again, this time with a torrent of low-priced goods that has gathered pace since the first wave of U.S. tariffs in 2018.
The United States has tightened the screws further, and Europe has joined in with its own measures. Yet the core dynamic remains intact.
Excess industrial capacity at home, soft prices at the factory gate, and a weak domestic recovery are pushing Chinese manufacturers to look outward for growth.
The result is a flood of competitively priced products that is reshaping trade routes and pressuring rivals from Detroit to Dresden.
Washington’s stance hardened in 2024 when the White House ordered steep new Section 301 rates on targeted Chinese goods.
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Electric vehicles now face a 100% tariff, with increases also applied to batteries, critical minerals, solar cells and other strategic items.
The U.S. Trade Representative later finalized those actions after a statutory review, locking in a framework that builds on the duties established during the Trump era.
Brussels moved in parallel on electric cars, the European Commission imposed definitive countervailing duties of up to 35.3% on battery electric vehicles from China, citing the injury risk from subsidized imports.
Those measures, which follow a provisional step in July 2024, are now in force across the bloc.
The policy response has not stopped Chinese output from finding buyers elsewhere.
China’s customs data show total trade hit a record in 2024, with exports rising more than 7% in yuan terms even as producers cut prices to win orders. The rise speaks to a simple reality.
When the U.S. border tightens, goods are redirected to Europe, Asia and Latin America, often at lower price points that domestic competitors struggle to match.
What gives this export push its edge is price. China’s producer prices have been negative for months, reflecting persistent deflation pressure inside its industrial economy.
That discount shows up in overseas quotes for everything from solar components to household appliances and chemicals, reinforcing the appeal of Chinese supply for importers and retailers facing cost-conscious consumers.
Official data in mid-2025 still showed factory-gate prices falling year over year.
The near-term effects cut in two directions for the United States and Canada.
Lower sticker prices on tradable goods can lean against inflation in retail categories where Chinese supply dominates, even as tariffs lift costs on targeted items such as EVs and certain clean-tech inputs.
At the same time, manufacturers on both sides of the border face margin pressure and market share loss in lines directly exposed to Chinese competition.
That squeeze is most acute in sectors where China’s scale and state support have delivered aggressive cost curves. The concern is not abstract.
As Janet L. Yellen, U.S. Treasury secretary, said in an April statement after meetings in Guangzhou: “I am particularly concerned about the impact of Chinese industrial overcapacity in certain sectors as a result of government support, and the impact it could have on the American economy.”
Tariffs reroute trade rather than stop it, american measures have effectively sealed the door on Chinese EVs, but European ports have seen steady arrivals, now subject to countervailing duties.
In emerging markets, Chinese brands are expanding distribution, sometimes financed with China-backed credit and supported by e-commerce channels that lower entry barriers.
Even within North America, the risk of transshipment through third countries keeps trade officials vigilant, though concrete cases are typically handled quietly under customs rules.
The next phase will turn on demand abroad and policy at home. If Chinese authorities succeed in reviving household spending, exporters could regain pricing power and ease the deflation impulse that has filtered into global goods markets.
If not, low prices are likely to persist as firms chase volume to keep lines running. Either way, the global response is converging.
Policymakers are drawing clearer lines around strategic sectors while trying to preserve openness in the rest of the system. The line drawing will not be tidy. It rarely is when politics, industry strategy and consumer prices collide.
Expect continued volatility in tariff-exposed categories and widening price gaps between protected and unprotected goods. Watch European demand for Chinese autos and components as a bellwether for how far countervailing duties bite.
Track U.S. import data in batteries, solar cells and critical minerals for signs that supply chains are relocating rather than shrinking. And keep an eye on China’s producer price trend.
As long as factory-gate prices are soft, the world will feel the pull of its cut-price exports, no matter how many barriers go up at the border.
