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Michael Froman Warns of Global Economic Crisis as China's Export-Led Growth Model Faces Potential Breaking Point

Michael Froman, president of the Council on Foreign Relations, warned that the world's ability to absorb China's overcapacity is approaching a breaking point. While China achieved a record merchandise trade surplus of approximately $1.19 trillion in 2025, its domestic market faces a structural decline characterized by an unresolved real estate crisis, weakening consumer spending, and high youth unemployment. To cushion its domestic downturn, Beijing has flooded global markets with subsidized, high-tech goods, including electric vehicles and solar panels. This export-led strategy has met significant international resistance, prompting the US and European Union to implement protective measures. The administration announced a new 12.5 percent duty on Chinese goods at the end of July 2026, while the European Union introduced a stricter protection regime for the steel industry. Froman noted that China's export machine is poised to stall as it nears a point where it runs out of customers. He suggested that as global demand limits are reached, protectionism is likely to rise, potentially closing off China's access to broad foreign markets and accelerating the failure of its current growth model.

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