Michael Froman, a former US Trade Representative and current president of the Council on Foreign Relations, warned in a recent Foreign Affairs essay that the world's capacity to absorb Chinese overcapacity is approaching a breaking point.
Export overcapacity reaches a limit
The warning follows data from the International Monetary Fund showing global GDP growth hovering around 3.1% this year, while China posted a trade surplus of $1.2 trillion in 2025, the largest on record, and saw its surplus expand by more than 20% in early 2026.
Why the warning matters
China's export-driven growth model relies on selling goods at prices up to 30% below rivals, helped by an undervalued currency, state subsidies and production mandates. This has forced many Chinese manufacturers into loss-making positions and driven a flood of cheap products into markets worldwide.
"The political appetite for accepting the deindustrialisation and critical dependencies that come with the flood of Chinese imports is finite and shrinking," Froman wrote.
Even traditionally pro-trade blocs such as the European Union are moving to erect barriers, while the former US president increased tariffs on Chinese goods last year. The combination of rising protectionism and dwindling overseas demand could stall China's export engine.
Possible policy responses
United States officials may find themselves handling the fallout if China's export model collapses. Froman argues that, should a crisis originate in China, the cleanup is likely to fall on the United States and the institutions it anchors.
Beijing has signalled a desire to rebalance its economy toward domestic consumption, but Froman doubts that China will abandon its export-centric strategy entirely, describing it as both an economic grand strategy and a political project.
Views from other analysts
Other experts echo the concern. Apollo chief economist Torsten Slok has spoken of a "China shock 2.0", noting a shift from labour-intensive to capital- and tech-intensive exports. Federal Reserve economists observed the same trend in a May paper.
Former Treasury official Brad Setser warned that China now produces two-thirds of global car demand and more than half of the world's steel, aluminium and shipbuilding output, creating a dependency that could be weaponised.
If protective measures tighten, Chinese manufacturers could lose access to a broad swath of foreign markets, accelerating the failure of the export-led model and potentially sparking a new global economic downturn.