China's Export Dumping, Distorted Capitalism, and AI Bubble Risks

Key Quotes

"the main reason i wrote the book is something that you teased just now in your introduction which is that so many young people today when they are polled in america say that they are disillusioned with capitalism and in fact many of them particularly progressives say that they would rather have socialism now that tells you about what is the disenchantment with the current system that we have and what i've tried to do in the book and i don't think i would change anything from what i wrote about this 18 months ago when it was published is that you've seen more of that which is that we're seeing much wider income inequality wealth inequality and we are seeing a lot of the incumbents get much more entrenched and my point is that capitalism is not supposed to work this way capitalism is supposed to be pro churn it's supposed to be pro competition and we are supposed to weed out a lot of the old players rather than have this kind of system where it gets sclerosis"

Rushir Sharma explains that the core motivation for his book was to address the widespread disillusionment with contemporary capitalism among young people, many of whom express a preference for socialism. Sharma argues that this disenchantment stems from increasing income and wealth inequality, and the entrenchment of existing players, which contradicts capitalism's intended function of promoting churn and competition.

"well the main reason for that is that the amount of regulation we've had in the system that has made home supply in very short supply in fact so the number of new homes we're building in america today is roughly the same level as it was 30 40 years ago when the population was a lot less the kind of regulation we have today makes it very difficult to build new homes so demand keeps going up but supply just doesn't come on the market"

Rushir Sharma identifies excessive regulation as the primary driver of the unaffordable home prices in America. Sharma points out that current home construction levels are stagnant compared to decades ago, despite population growth, because regulations make building new homes exceedingly difficult. This imbalance between rising demand and limited supply, Sharma contends, is a key issue within the current capitalist system.

"i think the single biggest story of 2026 which could emerge is the fact that china's dumping is causing so much pain to so many countries around the world what exactly is going on here which is that china's always known to be an export powerhouse but over the last decade or so this is beginning to shift in one very important way in the past yes china would export a lot and it would also increase prices over time last few years what's begun to happen and this has become more acute in the last couple of years that china's export volumes have surged but it has done so by cutting prices so chinese export prices are declining by 20 a year whereas export volumes are surging by 40 and that is leading to a flood of chinese goods around the world which is hurting the manufacturing sector in places from europe to southeast asia and i suspect that that backlash will really become more intense in 2026 because a lot of these countries were so focused on fighting trump's trade battle in 2025 but that seems to have peaked now i think the attention is going to turn to what china does and i think that the backlash against this china dumping is going to get pretty intense this year"

Rushir Sharma highlights China's export strategy as a potentially significant global story for 2026, noting a shift from increasing prices to surging export volumes driven by price cuts. Sharma explains that China's export prices are decreasing by 20% annually while volumes increase by 40%, leading to a global influx of Chinese goods that harms manufacturing sectors worldwide. Sharma anticipates an intensified backlash against this "China dumping" in 2026 as countries shift their focus from trade battles with the US to China's practices.

"well i think that the world is very sensitive to higher interest rates i know that some of the previous guests are forecasting lower interest rates this year but i think that the real surprise could be that by the end of this year we get higher interest rates particularly long term interest rates and when interest rates go up that's when money really starts to dry up so i think that what you're alluding to here tom is the fact that i wrote that we have some sort of an ai bubble but the bubble can keep inflating until interest rates go up and money dries up i think that that happens possibly by the end of the year when you end up getting higher interest rates as inflation remains sticky and the fact that we still have you know like a lot of this liquidity propping up financial assets but the moment interest rates go up particularly long term interest rates that's when money dries up"

Rushir Sharma suggests that higher interest rates, particularly long-term ones, could be a significant surprise by the end of the year, leading to a drying up of money. Sharma posits that this rise in interest rates, potentially driven by sticky inflation and existing liquidity supporting financial assets, could burst any existing bubbles, including a potential AI bubble. Sharma believes that the moment long-term interest rates increase, the flow of capital will be significantly curtailed.

"well i think pair it back to pair it back to basic fundamentals if we look from 1973 through to present day we can count the nber recessions we look at the economic data today it is not pointing to a recession in the us and we've got fiscal stimulus and monetary support in the rest of the world take a look at s p total returns over those periods in a non recession year nine times out of 10 the s p 500 gives a positive total return so the idea that one would bet against the economic momentum today when you've got everything aligned fiscal stimulus regulatory easing the lagged effect of monetary stimulus all coming together in 2026 i would be betting on equity markets continuing to climb a wall of worry and some of the investment spending from companies needing to play catch up in order to stay relevant in terms of a growing global economy"

John Bilton argues that current economic data does not indicate a recession in the U.S., especially when considering the presence of fiscal stimulus and monetary support globally. Bilton notes that historically, in non-recessionary years, the S&P 500 has delivered positive total returns approximately nine out of ten times. Bilton suggests that with aligned fiscal stimulus, regulatory easing, and the lagged effects of monetary stimulus, betting against economic momentum and expecting equity markets to continue climbing is a reasonable position.

"well i think that the key message is when we think about volatility in markets and as being an individual investor the most important thing is to make sure that you are not positioned in a way that when volatility eventually does strike that you are forced to sell positions that you shouldn't that's the only way to destroy value over the long run so what that means is not being overconcentrated to certain factors not having too much leverage and making sure that the overall allocation is not so extended that if you have liquidity needs during a time of inevitable volatility you don't have to sell your equities"

Cameron Dawson advises individual investors that the most crucial