What if China exports deflation as factory-gate prices collapse?
Chinese export prices down 10% YoY exports deflation and crushes rival-EM manufacturer margins: Alibaba, semis and China-demand proxies lead, the yuan softens and global inflation expectations get dragged lower as cheap goods flood out. Rhymes with the 2015-16 China overcapacity/PPI-deflation wave that pressured global industrials. Forward angle: this is disinflationary for DM importers (bond-friendly) but a direct margin assault on Korea/Taiwan/Vietnam/Mexico exporters, the EM-vs-EM relative trade is the real edge here, not the broad risk-off.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a mixed shock. Collapsing factory-gate prices send Chinese export prices down 10% YoY, exporting deflation and crushing rival EM manufacturers' margins. The trigger decomposes into signed root‑shocks — China growth ▼ · Inflation surprise ▼ · Trade tension ▲ — which propagate through our causal graph to the markets below.