As the world economy braces for another shock from Donald Trump’s tariff policies, a stark warning has emerged from India. Nilesh Shah, MD of Kotak Mutual Fund, has sounded the alarm on China’s response to mounting trade barriers: “China will export deflation and recession to the world.”
Shah argues that China’s vast manufacturing power—driven by strategic precision—will compel other nations to rethink their economic strategies. His message is clear: countries must realign their trade and industrial policies to remain competitive.
“Every nation will have to measure itself against China and adopt its ‘sam, dam, dand, bhed’ strategy,” Shah writes, referencing the ancient Indian doctrine of negotiation, incentives, punishment, and deception.
China’s trade surplus for 2025 is expected to touch nearly a trillion dollars, making it the largest net exporter worldwide. Only two other economies—the US and Germany—are projected to cross the trillion-dollar export mark, but neither matches China’s surplus.
With Trump’s tariffs restricting access to US markets, surplus Chinese goods are flooding emerging economies, disrupting local industries, causing job losses, and deepening trade imbalances. According to Shah, this isn’t just an economic shift—it’s a systemic threat.
“China will export deflation and recession to the world,” he warns, emphasizing that the impact will be far-reaching. In his view, nations have little choice but to respond—by not only adjusting trade policies but also adopting strategic moves that mirror China’s relentless pursuit of economic dominance.
