Facing the trading facts

China’s economy is not in good shape, but exports are still booming—auto exports up 70% in the first half of 2026 even as domestic auto sales fell 20%. Total auto exports in June topped one million in one month for the first time, which considering this was from a standing start just a few years ago, is just stunning. The German, US and Japanese auto industries are shaking in their boots. And this is not the only industry. At the heart of the export surge is Chinese expertise, efficiency and value for money, but there are other factors too—systemic coordination, the rigorous control of the RMB’s value, and massive subsidies and benefits provided to chosen companies and sectors. Europe and the US, but also the Global South—many countries have to face this question: what is the long-term consequence of this ever-building China export drive?

Europe in particular is now in a fascinating position—its relationship with the US is unravelling even as the reality of China’s impact becomes clear. But will these two issues finally convince these countries to actually come together and coordinate policies and actions? Divide and rule is a strategy that the Chinese are very familiar with, and that has to be seen as the context of Chinese Foreign Minister Wang Yi’s trip to four Nordic countries earlier this week. The EU seems to be ever more vocal on the need for protective measures and is apparently increasingly willing to face the various factors playing into the Ukraine conflict. But with what result?

There are signs the Global South is getting the point too, though it is harder for these countries to respond effectively. South Africa’s recent decision to raise tariffs on certain Chinese imports, such as autos, in order to encourage Chinese brands to localize production, or at least assembly, is a good example. We will see to what extent other countries are able or willing to emulate such an approach.

At the heart of all this are tectonic factors such as the World Trade Organization—now basically a dead letter, it seems—the destabilizing influence of Trump on just about everything, and the controlled RMB exchange rate and other China systemic issues. Massive problems all awaiting some kind of resolution. When and where can we expect a break point, and in which direction does it all break?

Have a thoughtful weekend.