The Next China Shock Is Here | The Ezra Klein Show
The Ezra Klein Show
554,689 views
Brad Setser follows Chinese trade closer than just about anyone else on earth, and he thinks we’re in the early days of a China Shock 2.0.
The first China Shock was when China came to dominate low-end manufacturing in the 2000s, filling American shelves with cheap clothes, toys and electronics, while devastating American factory towns. This new China Shock could be even more destabilizing. China now dominates advanced manufacturing: electric vehicles, batteries, solar panels. It’s outcompeting nearly all high-end manufacturing around the world, and other countries are just starting to feel the pain. And China isn’t slowing down. It’s moving into software, too. Its frontier A.I. models are neck and neck with American ones.
China’s success poses a serious threat to the economies and domestic politics of countries around the world. So what should those countries do about it?
Setser is a senior fellow at the Council on Foreign Relations.He served in top trade and economic roles in the Biden and Obama administrations. And he is widely cited across the field as one of the top analysts of China’s economy and trade practices.
0:00 Intro
1:33 China Shock 1.0
7:54 What makes the Chinese economy distinct
13:07 China Shock 2.0
18:20 How Chinese manufacturing advanced
26:17 Is China just winning?
30:41 Currency manipulation
35:27 National security supply chains
36:18 Trump 1.0 trade policy
39:09 Biden administration trade policy
42:37 Trump 2.0 tariffs
48:28 China’s leverage points
49:43 Did the trade wars work?
56:40 China Shock 3.0?
59:50 Interdependence or decoupling?
1:05:19 Book recommendations
Read the full transcript here: https://www.nytimes.com/2026/08/21/op...
Watch more on @EzraKleinShow
Thoughts? Guest suggestions? Email us at ezrakleinshow@nytimes.com.
You can find transcripts (posted midday) and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-...
20 Comments
You can't blame China for all the issues the West has experienced in past 20 years!
One crucial area that is not focused on enough in this is the people. Not relying on highly talented and educated individuals to come from abroad and being a fully meritocratic system, the children are forced to learn intensely, only amplified by the fact that in many families there is only one child. That one child who lives in a really remote part of China competing with tens or hundreds of thousands of others to get to elite universities completely on merit. So you end up with a pool of very intelligent workers that are able to understand the higher tech industries and dominate here.
Unlike in America, where education has been in decline over the past decade or so and places in elite universities can be bought. I believe the pool of highly educated, highly capable, internal workforce is another key driver in China being well placed to have a China Shock 2.0.
Mid West factories started closing after competitive Japanese cars, TV, Walkman and other products entered US market. After Plaza Accord was forced onto Japan, production shifted to other countries and in 2000 to China after WTO accepted it.
If we zoom out, I'd say that China is just doing what America, Germany, Japan used to do decades and centuries ago - in energy, in internet, in software, in home appliances, in cars, and now in AI. Invent something cool if you can, make it affordable and accessible, and dominate the market. Once you have dominance it will be harder to dislodge you. I think it's easier to understand China's strategies without the colored lenses of Geopolitics. Perhaps the only parallel is that America, like the Japanese and German combustion engine carmakers, are just not used to being challenged in their own 'market'.
There’s an old Chinese saying: “Do not impose on others what you would not accept yourself.” Perhaps that principle should apply to great powers too.
The Next China Shock Is Here | The Ezra Klein Show
The Ezra Klein Show
554,689 views
Brad Setser follows Chinese trade closer than just about anyone else on earth, and he thinks we’re in the early days of a China Shock 2.0.
The first China Shock was when China came to dominate low-end manufacturing in the 2000s, filling American shelves with cheap clothes, toys and electronics, while devastating American factory towns. This new China Shock could be even more destabilizing. China now dominates advanced manufacturing: electric vehicles, batteries, solar panels. It’s outcompeting nearly all high-end manufacturing around the world, and other countries are just starting to feel the pain. And China isn’t slowing down. It’s moving into software, too. Its frontier A.I. models are neck and neck with American ones.
China’s success poses a serious threat to the economies and domestic politics of countries around the world. So what should those countries do about it?
Setser is a senior fellow at the Council on Foreign Relations.He served in top trade and economic roles in the Biden and Obama administrations. And he is widely cited across the field as one of the top analysts of China’s economy and trade practices.
0:00 Intro
1:33 China Shock 1.0
7:54 What makes the Chinese economy distinct
13:07 China Shock 2.0
18:20 How Chinese manufacturing advanced
26:17 Is China just winning?
30:41 Currency manipulation
35:27 National security supply chains
36:18 Trump 1.0 trade policy
39:09 Biden administration trade policy
42:37 Trump 2.0 tariffs
48:28 China’s leverage points
49:43 Did the trade wars work?
56:40 China Shock 3.0?
59:50 Interdependence or decoupling?
1:05:19 Book recommendations
Read the full transcript here: https://www.nytimes.com/2026/08/21/op...
Watch more on @EzraKleinShow
Thoughts? Guest suggestions? Email us at ezrakleinshow@nytimes.com.
You can find transcripts (posted midday) and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-...