China’s Export Surge Triggers Global Deflation and Recession Concerns, Warns Nilesh Shah
China’s Global Economic Impact: Nilesh Shah Warns of Deflation and Recession
As global trade faces another shock from Donald Trump’s tariff measures, a stark warning has emerged from India. Kotak Mutual Fund MD Nilesh Shah has sounded the alarm on X, cautioning that China’s economic response to rising trade barriers will send deflationary shockwaves worldwide. His assessment is direct and unfiltered: “China will export deflation and recession to the world.”
The sheer scale of China’s manufacturing power, combined with its strategic economic intent, is set to reshape the global trade landscape. With its 2025 trade surplus expected to reach nearly a trillion dollars, China remains the largest net exporter in the world. In comparison, only two other economies—Germany and the US—are anticipated to surpass the trillion-dollar export mark this year, but neither can match China’s surplus. This dominance in exports places intense pressure on other nations, compelling them to reassess their economic strategies in order to remain competitive.
Shah highlights the urgent need for countries to adopt a more aggressive economic stance. He invokes the ancient Indian strategic framework of ‘sam, dam, dand, bhed’—a mix of negotiation, incentives, punishment, and deception—suggesting that only by mirroring China’s approach can nations hope to compete effectively. “Every country will have to benchmark them to China and copy their ‘sam, dam, dand, bhed’ policy to be competitive,” he emphasizes.
The deflationary impact of China’s export-driven approach is already being felt. With Trump’s tariffs curbing Chinese access to the US market, surplus goods are now being redirected to emerging economies. This influx of cheap Chinese products is undercutting local industries, leading to job losses, collapsing businesses, and widening trade deficits in regions spanning Southeast Asia to Latin America. The consequences extend far beyond temporary market disruptions—Shah warns that this is a systemic threat with long-term repercussions for the global economy.
The situation demands strategic recalibration from every country. Protective trade policies alone may not suffice; nations must rethink their approach to economic competition in light of China’s relentless push for dominance. The unfolding crisis underscores the interconnected nature of global trade, where one nation’s surplus can trigger widespread deflationary pressures across multiple economies.
As the world braces for this evolving challenge, Shah’s message is clear: no country can afford to ignore the economic force that China represents. The coming months will be crucial in determining how nations respond to this pressing issue, whether through trade policy adjustments, industrial reforms, or broader economic strategies aimed at countering the deflationary spillover.
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