China's Factory "Tsunami" Threatens To Swamp US Industry

A $1.9 trillion manufacturing push from China is rattling the global industry - and the United States is stepping up its defences. US President Donald Trump on Wednesday announced a steep 125 per cent tariff on all Chinese imports, calling it a necessary move to shield American manufacturers from an onslaught of cheap goods flooding in from China. The hike - up from the previously declared 104 per cent - comes as part of Trump's tariff strategy, which includes a 90-day pause on duties for most other countries.

While other nations caught a temporary break, China received no such relief. Trump said that during the 90-day window, a significantly reduced reciprocal tariff of just 10 per cent would apply to countries that engaged in fair negotiations. But for China, the gloves were off.

Over the last four years, China has redirected close to $2 trillion in domestic funds - money once used for real estate and housing - into turbocharging its industrial base. The result: a factory boom of unprecedented scale. 

Backed by state-owned banks, Chinese manufacturers are now rapidly expanding and modernising their production lines - turning out everything from electric cars to fertilizers for global markets.

"The tsunami is coming for everyone," said Katherine Tai, former US trade representative under former President Joe Biden, in a statement to The New York Times.

According to fresh data from China's central bank, industrial borrowers have received nearly $2 trillion in extra financing, and the country is not slowing down. BYD, China's leading EV company, is currently building two car factories that will soon eclipse Volkswagen's massive plant in Wolfsburg, Germany - the world's largest to date.

In 2023, Chinese exports surged 13 per cent, followed by a 17 per cent jump in 2024. Exports now make up around 20 per cent of China's GDP. 

In contrast, the US is seeing its own export numbers sag. American exports now account for just 11 per cent of its GDP - down from 13.6 per cent in 2012 - and exports to China alone dropped by nearly 3 per cent last year to $144 billion.

Chinese imports to the US rose to almost $440 billion, pushing the trade deficit with China to $295 billion.

Other countries aren't staying quiet, either. The European Union has raised tariffs on Chinese electric vehicles to 45.3 per cent. Brazil has increased duties on Chinese metal and fibre optic cables. Mexico and Thailand are also looking at similar steps to protect their industries.

Thailand has proposed a 7 per cent tax on low-cost goods from China. Mexico is thinking about matching the US tariff plan. But for Thailand, Chinese imports led to a 50 per cent drop in local manufacturing last year, according to ASEAN Briefing.

Trump's tariff plan aims to stop the same thing from happening in the US. Earlier duties have already slowed down cheap Chinese EVs from entering the American market.