China's export-driven economic model is hitting a wall, and the whole world might feel the impact. The country's trade surplus reached nearly $1.2 trillion in 2025, growing three times faster than global goods trade. That's a lot of stuff that needs to find a home, and the pressure is mounting on economies in the U.S., Europe, and developing countries.
Michael B. G. Froman, a former U.S. trade representative and now president of the Council on Foreign Relations, laid it out in a Foreign Affairs piece in August: the world's ability to absorb "Chinese overcapacity is approaching a breaking point." He's not just talking about trade tensions; he's warning that a sharp slowdown could ripple through China's trading partners, leaving the United States to manage the fallout.
The problem isn't just political. China's economy has grown so large that if its exports keep expanding at several times the pace of global goods trade, it might eventually run out of foreign buyers. Add rising protectionism to the mix, and Chinese manufacturers could find themselves locked out of key markets.
Trade Pushback
The pressure is already showing up in policy. Treasury Secretary Scott Bessent has been pushing G20 nations to rethink their trade relationships with China, arguing that the world can't sustain a country with a $1.2 trillion trade surplus. He's also called on Beijing to boost domestic consumption instead of leaning so heavily on exports.
The U.S. is also weighing additional tariffs on Chinese goods, following a Section 301 investigation into excess industrial capacity. The probe targets manufacturing sectors where Washington says persistent trade surpluses and underutilized capacity are contributing to global imbalances.
China is facing resistance on multiple fronts. At a recent G20 meeting, the other 19 members backed language addressing cheap exports and policies that worsen global economic imbalances, while China opposed those provisions. That's a rare show of unity against Beijing.
Despite the pushback, China's exports rose 25% year over year in August, up from 23.9% in July, while imports jumped 28.2%, according to customs data reported by Reuters. The numbers show China's factories are still humming, but the question is for how long.
If foreign markets become less accessible, the fallout could spread well beyond China. Commodity exporters and developing economies that depend on Chinese demand could see weaker exports and lower prices for raw materials. Chinese companies, banks, and local governments could also come under pressure.
The Way Out
Froman argues that the most effective solution is a gradual rebalancing of China's economy toward domestic consumption, along with lower industrial subsidies and adjustments to the renminbi. He also calls for coordination among China, the U.S., and other major economies to manage trade barriers and prevent the adjustment from becoming a wider economic shock.
He points to the G-20 summit in Miami this December as a prime opportunity for the U.S. to put China's economic imbalances at the center of discussions. Washington should work with other major economies to secure verifiable commitments from Beijing to revalue the renminbi, reduce subsidies, and rebalance the economy. It's a tall order, but with the stakes this high, kicking the can down the road isn't really an option.
