Weighing why China is juicing exports

The big economic news this week was Biden’s very large tariffs on a number of Chinese-made goods. Those tariffs appear to have acted as a catalyst for a bunch of other countries — India, Brazil, Vietnam, Thailand, Mexico, the EU, etc. — to consider their own tariffs on China.

In other words, much of the world now sees the Second China Shock as a danger to their own manufacturing industries and is acting accordingly.

This is a huge, momentous shift. A year and a half ago, when I declared that the global economic system that had defined the previous 2-3 decades was now breaking down, some people naturally thought I had overstated my case. Now even critics of the shift are forced to admit that a new era is upon us.

What the era of decoupling, competition, and fragmentation means for the world, and how to manage it effectively, will be the subject of a huge amount of discussion and analysis in the years to come. But for right now, an interesting question that I think deserves more thought is: Why is China exporting so much stuff?

Most of the new trade barriers and industrial policies that we see popping up all over the world are either directly or indirectly China-related. The new tariffs are explicitly in response to China’s vast and rising trade surplus in manufactured goods:

There are a number of theories floating around out there about why Chinese cars, chips, steel, solar panels, machinery, and other goods are flooding world markets. The theories aren’t generally mutually exclusive — it could be some combination of any or all of these. But I thought it would be useful to gather all the hypotheses in one list.

Theory 1: Economic stimulus

In the 2000s, Chinese exports soared even as the Chinese economy was also powering