With sky-high tariffs from the U.S. shutting the door on exports, China is flooding its domestic market with unsold goods — a move that may backfire by dragging the economy into deeper deflation, shrinking profits, and spurring layoffs.
The trade war’s ripple effects are becoming more apparent as Chinese exporters, once reliant on American consumers, are now being encouraged by Beijing to reroute their products inward. On the surface, it’s a strategy aimed at survival. But beneath the surface, it’s triggering brutal price wars and undercutting an already fragile economy weighed down by weak consumption and factory overcapacity.
Goldman Sachs paints a bleak picture: retail inflation in China is expected to flatline at 0% this year, with wholesale prices projected to fall by 1.6%, extending last year’s drop. A deeper slump in the producer price index and shrinking consumer confidence are clear signs of strain.
To help offset losses, local governments and e-commerce giants like JD.com, Tencent, and Douyin have stepped in, offering massive discounts — in JD.com’s case, up to 55% — on goods originally destined for the U.S. But while this may provide a short-term lifeline for manufacturers, it’s rapidly eroding profitability and fueling a race to the bottom.
“Companies are cutting prices to stay afloat,” said Yingke Zhou of Barclays, “but it’s a dangerous game — one that eats into margins and threatens jobs.”
Some exporters are now operating at a loss just to keep their production lines running. Goldman Sachs estimates that around 16 million Chinese jobs — over 2% of the workforce — are tied to U.S.-bound exports, making the potential fallout severe. As more companies scale back or shut down, especially in regions reliant on foreign trade, unemployment is expected to surpass government targets.
Adding salt to the wound, the U.S. has ended the “de minimis” exemption — a move that forces Chinese e-commerce giants like Shein and Temu to pay tariffs on even low-value shipments. Analysts warn that the rule change, combined with declining cashflows, may push many small firms toward insolvency.
Beijing has so far held back from launching a large-scale stimulus, with officials framing current deflation as a “transition buffer” rather than a crisis. But with GDP growth projected at just 4% — well below the government’s 5% target — and confidence waning, pressure is building.
“The challenge isn’t just lost exports,” says Shen Meng of Chanson & Co. “It’s what happens when the domestic market can’t absorb the shock — when excess supply meets weak demand.”
For now, China is locked in a high-stakes survival game, trying to ride out a storm of its own making. But if the government continues to delay decisive action, the cost may be steeper than anyone expected.
What’s Your Take?
With U.S. tariffs forcing Chinese exporters to dump goods into the domestic market, China now faces a dangerous spiral of deflation, job losses, and price wars. Some say it’s a necessary pivot. Others see it as an economic red flag.
Do you think this strategy will help stabilise China’s economy, or is it digging a deeper hole?
Share your thoughts in the comments — is this a smart shift or a risky move?
Written By Queen Diana Story
Subscribe to Follow Global Trends for daily global news.
Find Out How To Make Money As A Full-Time Writer/Blogger Guide.
To Advertise or Publish A Press Release, send a mail to info.followglobaltrends@gmail.com
Related Articles
China Points Finger at America Over COVID-19 Origins
Chinese Envoy to Nigeria Asserts China’s Commitment to Defend Its Trade Interests
U S Blames China for COVID 19 Origins
Gabonese Striker Aaron Boupendza Tragically Dies After Falling from 11th Floor in China
