New Delhi, Sep 6 (IANS) China’s export-driven economy is headed for deep trouble as the US and Europe are already responding with protective measures to check the influx of these cheap goods that are hurting industrial growth and employment in western countries, according to an article.

"While China’s massive export machine is running at full throttle, generating historic trade surpluses exceeding the trillion-dollar mark, its domestic market is on the verge of collapse. An unresolved real estate crisis, sharply weakening consumer spending, and alarming youth unemployment are revealing the deep cracks in the People's Republic's economic model," stated the article by Konrad Wolfenstein, published by Xpert website.

The article highlights that Beijing is increasingly flooding the global market with subsidised, high-tech goods to cushion the downturn in its own economy. However, this course of action has now run into massive international resistance, with the US and Europe already responding with harsh tariffs and strict protective measures.

While China’s export statistics report record monthly figures, the retail sector, real estate, and labour market have been struggling over the last several months. "The crucial question is how long this model can be sustained before either trading partners pull the plug or the domestic market erodes so severely that it threatens political stability," the article observed.

It also points out that the sheer size of China’s trade surplus makes it clear why international observers are growing increasingly nervous. In 2025, China achieved a merchandise trade surplus of around $1.19 trillion, despite massive US tariffs and a generally tense geopolitical situation. Exports increased by 5.5 per cent, while imports remained virtually stagnant. This alone indicates that the Chinese economy is increasingly deriving its growth impulses from abroad and less and less from its own consumer spending.

The United States introduced a new 12.5 per cent duty on Chinese goods at the end of July 2026, following the expiration of a previous 10 per cent rate. Trade reports suggest that some of the exceptional export strength in June and July was due to pull-forward effects, as exporters and importers attempted to ship goods before further measures took effect. At the same time, it is noteworthy that, according to customs data, the US trade deficit with China fell by about a third in the first half of 2026, indicating that direct bilateral trade is increasingly being replaced by diversion through third countries.

While exports to the United States declined by approximately 20 per cent in 2025, shipments to Africa grew by 26 per cent, to Southeast Asia by 13 per cent, and to the European Union by 8 per cent. China has thus responded to increasing US trade barriers with a systematic diversification that does not diminish the overall surplus, but merely alters its distribution, the report points out.

While Washington focuses on tariffs and political pressure, the European Union introduced a significantly stricter protection regime for the steel industry on July 1, 2026. The duty-free import quota was reduced by 47 per cent to 18.3 million tons, while a 50 per cent external tariff applies to quantities exceeding this quota. The specific quota for China was cut particularly drastically, reportedly from around 2.4 million tons to just 0.8 million tons, the report further stated.

--IANS

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