The Risks of Export Dumping by China_Banner

As tensions between Washington and Beijing escalate, Stephen Jen and Joana Freire explore a powerful second-order consequence: the redirection of Chinese exports away from the US and into Europe. With US tariffs effectively closing one of China’s largest markets, this note considers what happens if China diverts even a fraction of that displaced supply toward Europe.

The result, they argue, could be a significant deflationary shock. In an extreme case, Europe’s bilateral trade deficit with China could triple. Prices on categories like electric vehicles, batteries, and toys could fall sharply, hurting local producers and forcing the ECB’s hand on rates. Alternatively, Europe may impose its own trade barriers — initiating a cascading protectionist cycle that could leave China economically isolated.

At the heart of the argument is a broader geopolitical pivot: Europe, often seen as the swing player in the US-China rivalry, may be pushed toward alignment with Washington. This note offers not just a warning on disinflation, but a blueprint for how a trade war becomes a trade bloc.


Key Quote

“If the US does not buy Chinese goods, ironically, few in the world could afford to buy cheap Chinese goods because the deflationary shock would be too acute.”


Table of Contents

  • Bottom line

  • The current state of China’s exports

  • The risks of export dumping by China

  • What could be the impact on imported prices and CPI in Europe?

  • What if Europe erects temporary protectionist measures?

  • Bottom line

To read more of our latest macro and market insights, click here to start a free trial of our research.

Disclosure

This communication is issued by Eurizon SLJ Capital Limited (“ESLJ”), a private limited company registered in England (company number: 09775525) having its registered office at 90 Queen Street, London EC4N 1SA, United Kingdom. ESLJ is authorised and regulated by the Financial Conduct Authority (FRN: 736926). This communication is treated as a marketing communication intended for professional investors only and is provided only for information purposes. It has not been prepared in accordance with legal and regulatory requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It does not constitute research on investment matters and should not be construed as containing any recommendation, advice or suggestion, implicit or explicit, with respect to any investment strategy or financial instruments, or the issuers of any financial instruments, or a solicitation, offer or financial promotion relating to any securities or investments. ESLJ and its affiliates do not assume any liability whatsoever for the contents of this communication, save to the extent agreed in any written contract entered into between ESLJ and the recipient, and do not make any representation or warranty as to the accuracy or completeness of any information contained in this communication. Views are accurate as at the time of publication. Opinions expressed by individuals are their own and do not necessarily reflect those of ESLJ or any of its affiliates. The value of any investment may change and an investor may not get back the original amount invested. Past performance is not an indicator of future performance. This communication may not be reproduced, redistributed or copied in whole or in part for any purpose. It may not be distributed in any jurisdiction where its distribution may be restricted by law and persons into whose possession this communication comes should inform themselves about, and observe, any such restrictions.

ESLJ-150425-R1

Subscribe to our insights

If you are interested in our content, please sign up below and we will deliver Eurizon SLJ insights right to your inbox.

    I consent to my data being collected and stored for the purposes of providing me information regarding my enquiry and related services. If you have any questions about your data please contact us at research@eurizonslj.com

    Envelopes on a wood background

    Our Research

    Our written research products aim to provide unique and orthogonal insights on key global economic and policy issues in a timely fashion.

    research page photo