BEIJING/HONG KONG (Reuters) - Jeremy Fang, a sales officer at a Chinese aluminium products maker, is trying to export more to markets in Asia, Africa and Latin America to offset the U.S. tariffs' impact. The problem, he says, is that his competitors have the same idea.
"It will only result in a mad rat race," said Fang, expecting his firm will have to reduce prices and accept lower profit margins. "The cake is only that big. We all want to grab a piece so the competition will get intense."
The trade war between Washington and Beijing, which escalated this month with U.S. President Donald Trump imposing additional 10% tariffs on Chinese goods as an "opening salvo," could deal a new supply shock to the rest of the world.
Chinese producers, facing weak demand at home and harsher conditions in the United States, where they sell more than $400 billion worth of goods annually, have no choice but to rush to alternative export markets all at the same time.
But no other country comes even close to U.S. consumption power, significantly limiting the production the rest of the world could absorb from its second-largest economy.
This will intensify price wars among Chinese exporters, squeezing their profitability, while also risking further political backlash in the new markets and fanning deflationary forces, if smaller margins result in job losses, wage cuts and reduced investment.
Frederic Neumann, chief Asia economist at HSBC, says market diversification is an understandable but unsustainable strategy.
"One risk is that suddenly every Chinese exporter will look to develop the same other markets," said Neumann, adding it would weigh on profits.
"But the real risk is that the receiving countries might ultimately then be forced to raise restrictive measures on China, because their own producers are coming under pressure."
Tensions are already high. Over the past year, the European Union has increased tariffs on Chinese electric vehicles while India, Indonesia and other emerging markets have raised their own trade barriers on certain Chinese products.
China is a formidable competitor in some sectors. Major electric vehicle makers such as BYD or DeepSeek's AI platform have already made a mark on the global stage.
"We have very strong supply chain systems," said Dave Fong, who manufactures school bags, talking teddy bears, stationery and consumer electronics in China and is investing 30-40% more on advertising and business development in Europe and Asia.
"From one idea to mass production, everything is very fast."