CURRENTS OF RISK
ACROSS THE WORLD?
Global Demand for Chinese Goods Still Rising
Western barriers have blocked Chinese exports in strategic sectors: EVs, solar panels, semiconductors.
But tariffs don't always slow production. They reroute it, and are turning a trade dispute into a potential dual-shock, splitting the global economy.
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The thing we know about bubbles is that they can explode dramatically in size and then go pop
China's factories are running at full capacity even as domestic demand collapses.
Disinflation in China mirrors the export surge as factories compete in a race to zero, slashing margins to keep lines moving.
The surplus flows elsewhere: China's excess inventory is flooding open markets across Asia, Africa and Latin America.
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Tariffs aimed to level the playing field with China. Instead, they’ve created cracks that overcapacity is flowing through.
Sources: Bloomberg, China's General Administration of Customs, Sept. 2025
Sources: Bloomberg/US Census Bureau, July 2025
Share of total US imports for consumption
China's US Trade Footprint Shrinks
But in the US, tariffs flip the script.
Where Chinese goods can’t penetrate, prices rise, supply chains strain and inflation persists.
Sources: Customs General Administration, Bloomberg, Oct. 2025
The export price index has fallen below 100 since May 2025, indicating lower prices from a year before.
China's Export Prices Fall
China’s excess capacity is a global force, traveling along the path of least resistance.
This surplus is fueling cutthroat competition abroad, crushing margins for manufacturers.
Cheap EVs have driven down car prices in Thailand. Smartphones from Chinese makers are undercutting rivals across Vietnam and Singapore. In Africa, subsidized solar panels and batteries are flooding markets, displacing other suppliers.
OVERCAPACITY SPREADS
WHAT IF CHINA’S
Source: BloombergNEF
Power Demand From AI Data Centers to Quadruple in 10 Years
Source: PJM Interconnection
U.S. utilities are projected to invest over $200 billion annually in grid upgrades through 2026. Financed largely with debt and locked into regulated rate structures for decades, structurally higher energy costs will persist whether hyperscale data centers operate at full tilt or sit half-empty.
Source: US Energy Information Administration
Electricity costs are near a record high
Utility Bills Keep Rising
Utility Bills Keep Rising
Industrial overcapacity in China has already affected the global economy. Overall, this should point to lower inflation, lower policy rates, but also fiscal risks as growth declines.”
Head of Emerging Market Macroeconomic Research, Fixed Income, PGIM
Magdalena Polan
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Exports to the US fall, but are hitting records in the rest of the world
Sources: China’s Ministry of Commerce, Bloomberg, Sept. 2025
Trade remedy cases filed in 2024 were the highest ever.
Chinese Exports Triggered Record Pushback Last Year
The surge in lower-priced exports is sounding alarms around the world, as governments balance potential damage to their domestic industries against the risk of impacting ties with China, the top trading partner for more than half the planet.
Demand?
Rising Energy
Keep Pace With
Can the World
Global data center power demand outlook by market
Sources: US Census Bureau
Chinas excess capacity is a global force, traveling along the path of least resistance.
This surplus is fueling cutthroat competition abroad, crushing margins for manufacturers. Cheap EVs have driven down car prices in Thailand. Smartphones from Chinese makers are undercutting rivals across Vietnam and Singapore. In Africa, subsidized solar panels and batteries are flooding markets, displacing other suppliers.
Sources: Reuters, Vietnam News, Financial Times
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Share of total US imports for consumption
China's US Trade Footprint Shrinks
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