The prospects of the re-election of Donald Trump as the US President for the second term do not bode well for China and its economy which is going through a rough phase. If the high tariffs on Chinese goods promised by him are enforced, China’s exports will be stalled and subsequently, its manufacturing will be impacted due to overcapacity.
Trump said he would impose 60 to 100 percent tariffs on Chinese imports, blaming China for unfair trading practices and intellectual property theft. “We have to do it. You know, obviously I’m not looking to hurt China. But they’ve really taken advantage of our country,” he said. He called China the “real issue” for the US, saying it posed the “biggest threat.”
This has put pressure on the Biden administration to take similar measures. A few months ago, Biden increased tariffs on several items including electric vehicles, solar cells, semiconductors and advanced batteries. Biden did not want to look as one who does not care about American interests. Even Treasury Secretary Janet L. Yellen, who earlier had criticised tariffs, has justified the latest anti-China tariffs. She said her government “will not tolerate” artificially cheap Chinese imports again.
Economists warned that the high US tariffs would slow down China’s economy and put it at risk of deflation. It would slow down China’s GDP by 2.5 percentage points over the next 12 months if high tariffs are imposed, according to the global investment banking firm UBS. The growth rate may decline to 3 percent during 2025 and 2026 thanks to lower exports and its indirect impacts on Chinese consumption and investment. “Moreover, the lingering impact of weaker employment and capex will also weigh on the domestic economy,” UBS said.
China’s problem will certainly aggravate as other nations too are contemplating US-like tariffs on Chinese imports. “China will find it a challenge to sustain the 15-20 per cent export growth needed to use its excess capacity. External conditions are shifting, as the US is not alone in imposing tariffs. The EU and several emerging markets are planning if not already placing tariffs selectively on imports from China,” said Chetan Ahya, chief Asia Economist at Morgan Stanley.
Trump’s approach to political aspects may be unclear but he is less ambiguous when it comes to his economic approach to China, said Nancy Qian, Professor of Economics at Northwestern University. “If former US President Donald Trump returns to the White House, he would likely impose sweeping tariffs against China. The two countries are competitors, and America must win,” she said.
Trump however knows the tariffs on Chinese imports would bring him political mileage as well. “I happen to be a big believer in tariffs because I think tariffs give you two things: They give you economic gain, but they also give you political gain,” he said.
It is “deeply frustrating” for China not to have the ability to counter Trump’s policies even after the escalation with the US continues on multiple fronts, said Yun Sun, a non-resident fellow at the Brookings Institution’s John L. Thornton China Centre. “Trump’s unpredictability and his use of maximum pressure will put China in extremely difficult corners. A second Trump term will most likely see a tougher US stance on trade and economic relations with China, leading to further decoupling of the two economies,” she said.
Now Kamla Harris has replaced Biden as the Democrat candidate; China remains the hot topic in the presidential election campaigns. While Harris maintained she was not a protectionist when she ran for vice president in 2020, her government shifted to protectionism gradually. “America, not China, wins the competition for the 21st century,” she said recently. Notably, Biden had chosen to retain the tariffs imposed on Chinese imports by his predecessor Trump.
The potential victory of Trump is being widely discussed among Chinese people, especially, the elite. They fear it would lead to an even hotter trade war, leading to huge economic costs. While the election of either Trump or Harris is going to be detrimental to China, the former is going to make things worse for Beijing. “China is going to own us if you keep allowing them to do what they’re doing to us as a country. They are killing us as a country, Joe, and you can’t let that happen,” Trump said.