President Xi Jinping’s export machine has ploughed through five months of Trump’s eye-watering tariffs and somehow still delivered a record $1.2 trillion trade surplus. Restrict access to the US? No problem. Chinese manufacturers rerouted the goods: record Indian purchases in August, African shipments on track for an annual high, and Southeast Asia now taking in volumes that make the pandemic boom look like a warm-up act.

Naturally, this has foreign governments in a lather. Do they protect local industries, or avoid upsetting Beijing, the leading trading partner for over half the globe? So far, only Mexico has dared to retaliate openly, with floating tariffs of up to 50% on Chinese cars, steel and components. Elsewhere, the resistance is timid: India has received 50 dumping petitions in a matter of weeks, and Indonesia has promised to “monitor” viral TikTok jeans being flogged for 80 cents. At the same time, Latin America quietly imposes selective duties even as Brazil rolls out the red carpet for BYD to build electric cars tariff-free.

Beijing, ever the mix of velvet glove and iron fist, has pressed the BRICS to unite against “protectionism”, while discreetly warning Mexico to “think twice”. And looming in the background, Trump is urging NATO allies to slap China with tariffs of up to 100% — because why not blend Cold War geopolitics with consumer goods pricing?
And yet, the Chinese exporters are not merely surviving; they are thriving. A weaker yuan, chronic overcapacity, and razor-thin margins make them formidable. They can absorb duties, reroute via third countries, and dump goods at scale. Even the EU’s “tough” tariffs on Chinese EVs have done little — Europe remains their favourite dumping ground.

The irony? China’s booming exports are not making its manufacturers rich. Industrial profits fell 1.7% in the first seven months of the year, with Xi’s “anti-innovation” campaign pushing firms to cut prices to shift inventory abroad. China is exporting not only cars and smartphones, but also deflation. None of this fixes the country’s crumbling property market, demographic time bomb, or anaemic household spending — but it does remind the West that Beijing can still swamp global markets at will.

Emerging markets, meanwhile, are feeling the heat. Latin America is swamped with Temu’s bargain-basement e-commerce, Vietnam is slapping temporary brakes on Chinese platforms, and even South Africa is grumbling about surging auto imports — but prefers Chinese investment to confrontation. Cambodia admits it is hooked on both Chinese goods and Chinese capital. Everyone wants to resist, but no one dares.
And Trump’s tariff bonanza? Far from isolating China, it’s driving trade realignment. Indian imports of Chinese goods have hit record highs thanks to Apple’s suppliers quietly shifting iPhone production. Exports of Chinese chips, phones and components to India are on pace to smash records. In short: Washington cuts, Delhi buys. The “decoupling” looks suspiciously like re-coupling.

What we are witnessing is not protectionism, but a second “China shock”. Western tariffs have become paper tigers — easily dodged through trans-shipment, relocation and creative invoicing. Xi’s message ahead of his subsequent showdown with Trump is blunt: the American consumer is optional, the rest of the planet is not.
For investors, this matters. Every container diverted from Los Angeles to Lagos or from Houston to Hanoi chips away at Western leverage. The yuan remains weak, the dollar is under pressure, and Chinese exports continue to flood global supply chains. Add in a dovish Fed wobbling under White House interference, and you have the perfect cocktail for ongoing FX volatility.
China may not be growing rich on this strategy, but it is buying time, influence and market share. The West is importing yet another round of deflation with Chinese characteristics.