Trump's victory and the threat of more tariffs on China!
Donald Trump's presidential victory in 2024 has raised the bar for China's fiscal stimulus plans, which are expected on Friday. In his campaign, Trump threatened to impose additional tariffs of 60% or more on Chinese goods sold in the US. Tariff increases of at least 10% under Trump's first term as president did not harm America's position as China's largest trading partner.
But the new tariffs, potentially on a larger scale, would come at a key time for China. The country is relying more on exports for growth as it struggles with a slump in real estate and tepid consumer spending. If Trump raises tariffs to 60%, it could reduce China's exports by $200 billion, causing a drag of 1 percentage point of GDP.
Since late September, Chinese authorities have stepped up efforts to support slowing economic growth. The Standing Committee of the National People's Congress, the country's parliament, is expected to approve additional fiscal stimulus at its meeting this week, which ends on Friday.
Shares in mainland China and Hong Kong fell on Wednesday after it became clear that Trump would win the election. US stocks then rose with the three major indexes hitting record highs. In Thursday morning trading, Chinese stocks struggled to hold on to soft gains.
Trump, during his first term as president, placed Chinese telecommunications giant Huawei on a blacklist that restricted it from using American suppliers. The Biden administration expanded on these moves by restricting sales of advanced U.S. semiconductors to China and pressuring allies to do the same.
Both Democrats and Republicans supported the passage of newer export controls and efforts to increase semiconductor manufacturing investment in the US. China has doubled down on its technology empowerment by encouraging bank loans for high-end manufacturing. But the country had long benefited from American capital, as well as the ability to use American software and high-end parts.
US data show the trade deficit with China narrowed to $279.11 billion in 2023, from $346.83 billion in 2016. China's exports to the US fell 14% last year to $500.29 billion, according to customs data on Wind Information . That's still up from $385.08 billion in 2016, before Trump was sworn in for his first term.
Meanwhile, China's annual imports from the US rose to $164.16 billion in 2023, from $134.4 billion in 2016, Chinese data showed. Other analysts believe Beijing will remain conservative and roll out stimulus over the coming months rather than unleashing a big package on Friday.
China's top leaders usually meet in mid-December to discuss economic plans for the coming year. Officials will then announce the growth target for the year at an annual parliamentary meeting in March. Despite the tariffs, China remains an export powerhouse in markets outside the US. China's exports have also increased to countries that sell to the US, a Federal Reserve report found in August.
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