If Trump Wins... "China's Export Dependence Expands, Domestic Demand Weakens"

Analysis suggests that if former President Donald Trump, the Republican candidate for the U.S. presidential election, succeeds in his re-election, the Chinese economy will face even more difficult circumstances.

The U.S. daily Wall Street Journal (WSJ) reported on the 10th (local time) that the economic damage China would suffer during Trump's second term would be much greater than during his first term.

Trump campaigning in North Carolina
[Photo by Yonhap News]

During Trump's first term in 2018, the U.S. imposed tariffs of up to 25% on $350 billion worth of Chinese imports, including solar panels, washing machines, and steel, and China retaliated with countermeasures.

China was hit by the trade war between the two countries but recovered through the COVID-19 pandemic. During the COVID-19 lockdowns, Western consumers purchased home appliances, which helped Chinese exports recover.

China subsequently expanded its market entry into new regions such as the European Union (EU) and Southeast Asia, and its merchandise trade surplus set a monthly record of about $100 billion in June.

However, on the other hand, with the rise in manufacturing and export dependence, the Chinese economy has become more sensitive to the escalation of the U.S.-China trade war.

Patrick Zweifel, chief economist at Pictet Asset Management, estimated that if Vice President Kamala Harris, the Democratic presidential candidate, maintains President Joe Biden’s selective tariff policy, China’s economic growth rate would decrease by 0.03 percentage points next year.

However, if former President Trump’s tariff policy is applied, the decline in growth rate is expected to widen to 1.4 percentage points.

Global investment bank UBS projected that if the U.S. raises tariffs on China to 60%, China’s growth rate would fall by 2.5 percentage points over the following 12 months. However, if China retaliates, the decline in growth rate could be limited to 1.5 percentage points.

WSJ said that during Trump’s second term, China could respond with measures such as yuan currency depreciation, expanded benefits like tax rebates for exporters, and interest rate cuts.

Goldman Sachs stated that China could pressure the U.S. to reconsider its policies through measures such as increasing tariffs on U.S. products, halting the supply of critical minerals, and selling U.S. assets including government bonds.

However, WSJ analyzed that if the U.S. market is effectively closed by a 60% tariff rate, China would need to increase sales to other markets, but this would not be easy.

Countries like India, Brazil, and Mexico oppose Chinese imports due to concerns about domestic jobs and other issues.

Bost, from Seafarer Capital Partners, said that the option of relocating production bases overseas is viewed with mixed feelings by Chinese authorities because it could reduce domestic manufacturing employment.

WSJ reported that Chinese companies are under profitability pressure due to weakened demand and chronic oversupply, and producer prices have fallen for nearly two years.

This content was produced with the assistance of AI translation services.