President Donald Trump’s tariffs have caused plenty of heartburn on Wall Street, but China’s cheap and overwhelming exports have also been rippling through the global economy.

The Chinese growth model is running out of road, setting the stage for another global economic crisis, according to Michael Froman, a former U.S. Trade Representative and current president of the Council on Foreign Relations.

Writing in Foreign Affairs last month, he warned that “the world’s ability to absorb Chinese overcapacity is approaching a breaking point.”

The numbers illustrate the strain. The International Monetary Fund estimated that global GDP growth is running around 3.1% this year, while China’s trade surplus expanded more than 20% in early 2026. That follows a $1.2 trillion Chinese trade surplus in 2025—the largest in recorded history—which grew three times faster than global goods trade. The imbalance matters because a surplus of that size, sustained against sluggish world demand, ultimately depends on other countries running deficits and absorbing the excess output.

Pushback against the flood of Chinese exports is now widespread. Most notably, Trump hiked tariffs on China last year and made them the centerpiece of his “Liberation Day” trade war. But even once-stalwart defenders of open markets, such as the European Union, are racing to erect trade barriers against China.

“The political appetite for accepting the deindustrialization and critical dependencies that come with the flood of Chinese imports is finite and shrinking,” Froman wrote. “As these trends continue, protectionism is likely to rise, cuttingting off Chinese manufacturers’ market access.”

Helped by an undervalued currency, Chinese companies charge as much as 30% less than rivals elsewhere in the world. State subsidies and mandates from Beijing have also encouraged excess production and cutthroat price wars, forcing firms to turn to export markets—and leaving nearly a third of Chinese industrial companies operating at a loss.

Taken together, China’s export machine is poised to stall as it nears the point where it essentially runs out of customers, Froman explained.

“The result is an industrial machine that cannot stop and cannot slow down—but that, owing to the limits of demand, cannot keep going,” he added.

Global fallout, U.S. response

To be sure, Beijing has acknowledged it must rebalance its economy away from exports and industry, and has taken some steps to support consumer spending. China’s government is also trying to crack down on over-competition, the phenomenon known as “involution.”

But Froman argued that China cannot fully commit to abandoning its export-led growth model, because it is both an economic grand strategy and a political project.

“As Beijing debates whether to embrace the reforms necessary to avert disaster, other countries are likely to try to stem the flow of Chinese exports,” he predicted. “Such moves could suddenly close off China’s access to a broad swath of foreign markets, accelerating the failure of its export-led growth model and raising the prospect of a global economic crisis.”

Inside China, the fallout would see already-fragile businesses failing en masse, state-owned banks recording losses on “zombie firms,” cascading defaults in local government financing vehicles, and provincial revenues collapsing.

Abroad, China’s demand for raw materials and intermediate goods would dry up, hitting commodity-exporting economies and other developing countries that depend on China as a top trading partner.

Don’t expect China to come to the rescue, Froman wrote, noting that Beijing has shown little interest in taking on the role the U.S. currently plays in the global economy—as the importer of last resort and backstop of institutions such as the International Monetary Fund.

“Even if the next crisis is made in China, the cleanup is likely to fall, as it often does, on the United States and the institutions it anchors,” he said.

China shock 2.0

Others have sounded the alarm on the “China shock 2.0,” including Apollo chief economist Torsten Slok, who said last month that China is increasingly exporting the kinds of products that advanced economies once expected to dominate domestically.

Federal Reserve economists penned a similar note in May, finding that the products driving China’s export boom have shifted from labor-intensive goods in the early 2000s to capital- and tech-intensive industries today. The original “China shock” of the early 2000s followed China’s entry into the World Trade Organization in 2001, when a surge of low-cost Chinese manufactures was linked to widespread factory job losses in the United States and other advanced economies.

“Taken together, these elements suggest that ‘China Shock 2.0’ is not simply a continuation of earlier trends, but a new phase of global trade integration,” they wrote.

And last year, former Treasury official Brad Setser warned that China’s flood of exports could pose the worst threat to the global economy, even eclipsing Trump’s tariffs.

Imports of manufactured goods into China have grown by an average of just $15 billion annually over the last six years—essentially unchanged after accounting for inflation—while exports from China have shot up by more than $150 billion.

China alone now has the capacity to produce two-thirds of the world’s demand for cars, Setser estimated. China also makes more than half the world’s supply of steel, aluminum, and ships.

“This points to a world economy in which China has no need for the industrial inputs of other countries while leaving those countries dependent on Chinese-made goods—and vulnerable to Beijing’s political and economic pressure,” he wrote in a New York Times op-ed.

This story was originally featured on Fortune.com.