Amid the intensifying US-China trade war, cheap Chinese imports are disrupting Asian economies, exposing vulnerabilities and reshaping global trade dynamics.

China’s Export Surge Disrupts Asian Economies Amid US Trade War

US-China Tensions Unleash a New Wave of Economic Disruption

As US-China tensions erupt into a full-scale trade war, the ripple effects are being felt far beyond Washington and Beijing. President Donald Trump’s sweeping tariffs, some soaring as high as 145%, have not only strained the world’s two largest economies but also exposed a harsh reality for Asia: a surge of cheap Chinese imports now threatens to upend regional markets.

A report by Nomura paints a sobering picture. Analyzing data across 45 countries at an exceptionally detailed product level, Nomura found that even before Trump’s second term, China’s flood of low-cost goods was already slowing down manufacturing growth in many nations—particularly in Asia. The latest tariffs only intensify this trend, turning a steady stream into a relentless deluge.

Trade War Timeline: How It Escalated

The roots of today’s trade standoff trace back to March 4, 2025, when Trump announced plans to impose sweeping tariffs, targeting countries like China, India, Brazil, and the European Union. His goal? Correcting trade imbalances and, as he put it, making America “rich again and great again.”

By April, the US formalized a 10% tariff on all imports, along with steeper duties of up to 50% for specific trading partners. China, however, faced the harshest penalties: a jump from an already high 104% tariff to a staggering 145%, following Beijing’s retaliatory measures.

Despite these headwinds, China’s export engine showed little sign of slowing. Data from Nomura reveals that between 2017 and 2024, China’s exports to the US climbed 21% to $524 billion. More strikingly, exports to the rest of the world grew by 67% to $1.2 trillion, as Chinese manufacturers found creative ways to sidestep US tariffs—often rerouting goods through Mexico and ASEAN countries.

Trump’s Crackdown: Closing the Backdoor

Trump’s administration is now pressing Mexico and ASEAN nations to tighten controls and prevent Chinese goods from sneaking into US markets via re-exports. At the same time, Washington is rallying allies to help “box in” China, discouraging them from absorbing excess Chinese exports that could destabilize their economies.

Should these efforts succeed, China faces a daunting challenge: redirecting approximately $560 billion worth of annual exports to new markets.

China’s Strategic Dilemma: Three Risky Paths

Nomura outlines three potential strategies for China, none without significant risks:

1. Massive Production Cuts: Shutting down manufacturing could curb oversupply but risks plunging China into a deep recession with widespread job losses.
2. Domestic Stimulus: While boosting internal consumption might soften the blow, lingering property crises and cautious household spending habits limit its effectiveness.
3. Flooding Emerging Markets: Redirecting exports to emerging markets—particularly in Asia—is the most likely path, but it carries profound consequences.

Assuming China shifts just half of the displaced exports to emerging markets, Nomura projects its share of imports in these countries could leap dramatically. In Asia, the surge could raise China’s import share from 25.5% to 31.7% within a single year, disproportionately affecting smaller economies.

The Cost of Cheap Goods: A Growing Economic Strain

The influx of inexpensive Chinese products may initially seem like a boon for consumers, offering lower prices across a wide range of goods. However, the longer-term impact could be devastating. Local manufacturers, squeezed by razor-thin margins, may slash prices at the expense of profits, eventually leading to layoffs, reduced investments, and even widespread closures.

Nomura warns that the macroeconomic fallout could include rising trade deficits, deflationary pressures, and swelling fiscal deficits as governments scramble to shield local industries. Yet retaliation through higher tariffs isn’t straightforward; for many Asian nations, China remains a crucial trading partner and a vital source of foreign direct investment.

Moreover, 2024 marked a record surge in trade investigations against Chinese imports, many centered around anti-dumping measures, highlighting growing global unease over Beijing’s export strategies.

A Critical Juncture for Global Trade

In the final analysis, Nomura’s report underscores a troubling trend: countries that have seen the largest increases in Chinese manufactured imports are also witnessing the steepest declines in manufacturing growth. The close correlation between import penetration and producer price inflation suggests that the economic strain is more deeply entrenched than many policymakers anticipated.

As the US and its allies work to contain China’s export dominance, emerging economies must brace themselves for tough decisions. The choice lies between embracing short-term consumer gains or protecting their long-term industrial health.

In a world increasingly shaped by protectionism and shifting trade alliances, the ability of these nations to adapt will define their economic future.

Disclaimer:
This article is for informational purposes only. It reflects insights based on available data and expert opinions at the time of writing. It should not be construed as financial or investment advice.

source  : The Financial Express