Former U.S. Trade Representative Michael Froman warns that China’s record-breaking export surplus and industrial overcapacity are destabilizing the global economy, forcing nations to adopt increasingly protectionist trade policies.

Key Points

• China recorded a historic $1.2 trillion trade surplus in 2025, with growth outpacing global goods trade by three times.
• State subsidies and undervalued currency allow Chinese firms to price products up to 30% lower than international competitors.
• Nearly one-third of Chinese industrial firms are currently operating at a loss due to intense domestic price wars and overproduction.
• The European Union and the United States have implemented new trade barriers to counter the influx of cheap Chinese imports.
• Beijing faces pressure to rebalance its economy toward consumer spending, though the export-led model remains a core political strategy.

Why it Matters

The global economy faces a potential crisis as international markets reach their limit for absorbing Chinese industrial overcapacity. This shift toward protectionism threatens to disrupt established supply chains and could force a significant restructuring of global trade relations.