China remains silent in response to President Trump’s repeated statements about imposing new tariffs on Chinese products. Beyond expressing dissatisfaction, the government is likely waiting for directives from the upcoming Two Sessions—a key event in China’s political calendar—set to take place on March 4 and 5.
Meanwhile, analysts debate how these tariffs might affect U.S. consumers, inflation, and broader economic trends. However, it’s important to remember that China’s usual response to tariffs—beyond adjusting the yuan’s exchange rate—is to ramp up production and leverage its overcapacity.
Take sneakers, for example: In 2024, China increased the number of pairs exported to the U.S. by nearly 40%, yet the average FOB price per pair (in yuan) fell by 13%.
Overall, China’s footwear industry exported nearly 300 million more pairs worldwide than in 2023. However, the average FOB price per pair dropped from 39 yuan to 36 yuan year over year. Footwear ranks among China’s top 15 exports, totaling around $50 billion.
Processing trade for imports refers to the importation of raw materials, components, or parts into China for processing or assembly. The finished products are then sold domestically within China (not for export).
As for general trade imports, Premier Li Qiang views consumption as a means to increase production, create jobs, and attract investment. China’s playbook does not treat consumption as an end in itself. The much-touted ‘consumption upgrade’ from the past never materialized.
In 2024, EU total trade in products with the U.S. surpassed that with China by 18%.
China’s imports from Russia remained unchanged in 2024 (0%), while the EU plans to reduce its imports from Russia to nearly zero. The size of the loss is around 5% of estimated Russia´s GDP
In our January 13 issue, we referred to 内卷 (nèi juǎn), a widely used Chinese term describing a situation where, driven by subsidies, many companies flood the same sector, causing overcapacity and leading to cutthroat competition where everyone loses money.
The situation has reached a point where China’s State Administration for Market Regulation (SAMR) convened companies on February 25 to discuss nèi juǎn, alarmed by the irrational competition.
From the readout of the meeting, Meng Yang, deputy director of SAMR, offered little beyond bureaucratic jargon while listening to the companies. In fact, he simply urged them to maintain their confidence.
In 2024, the EU auto industry’s exports to China fell by 25% in value, while exports to the U.S. declined by 4%. Shipments to the UK rose by 3%, whereas exports to the rest of the world dropped by 8%.
China’s share as a destination for EU auto industry exports dropped to 9% in 2024, down from 18% five years earlier.
It all started well before COVID
France’s cognac exports dropped to €549 million in 2024, down from €720 million the previous year. China announced an anti-dumping investigation into brandy imports from the European Union, including cognac, in January 2024, in what was a clear retaliatory move following the EU’s probe into China’s electric cars.
We can’t help but wonder what Xi Jinping did with the two bottles of Cognac gifted by Macron during his state visit last May. Just imagining the Louis XIII by Rémy Martin—a decades-aged collector’s item—makes our mouths water. Out of curiosity, we asked a renowned distributor about the price. They had only two Louis XIII in stock: one priced at €10,000 and the other at €6,500.
Whey exports remain flat, milk plunges 22%, cheese slips 3%, and butter jumps 18%. Milk and whey account for three-quarters of EU dairy exports to China. Total drop amounts to €174 million.
The U.S. Trade Representative Office finds China’s push for dominance in maritime, logistics, and shipbuilding sectors unreasonable, burdening U.S. commerce.
The proposal mandates hefty fees per port call for any operator with even one Chinese-built ship or newbuild at a Chinese yard, applying to its entire fleet.
The discrepancy amounts to billions, highlighting a significant gap in reported trade data between China and Ireland.
JörgWuttke
the problem of industrial overcapacity, much like the problem of speculation and insane over investment in the real estate sector, is likely to be solved largely by gravity: companies and industries that have been propped up for years could collapse very quickly, forcing officials to react frantically.
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