The flags of China and the United States fly near the Bund before a U.S. trade delegation holds talks with their Chinese counterparts in Shanghai, China, on July 30, 2019.
Ali Song | Reuters
BEIJING — Donald Trump’s victory in the 2024 presidential election has raised the bar for China’s fiscal stimulus package, expected to be implemented on Friday.
During the campaign trial, Trump threatened to impose tariffs of 60% or more on Chinese goods sold to the United States. status of trading partners.
But new tariffs – potentially larger – will come at a critical time for China. The country is more reliant on exports for growth due to a sluggish housing market and tepid consumer spending.
Zhu Baoliang, former chief economist of China’s National Development and Reform Commission, said at a Citigroup conference that if Trump raises tariffs to 60%, China’s exports may be reduced by US$200 billion, causing a drag on GDP of 1 percentage point.
Since late September, Chinese authorities have stepped up efforts to support slowing economic growth. The Standing Committee of the National People’s Congress is expected to approve additional fiscal stimulus measures at this week’s meeting that ends on Friday.
“In response to a potential ‘Trump shock,’ the Chinese government may launch larger stimulus measures,” said Su Yue, chief economist at the Economist Intelligence Unit. “The overlap between the National People’s Congress meeting and the US election results shows that the government is prepared to take swift action.”
She expects the stimulus package to exceed 10 trillion yuan ($1.39 billion), of which about 6 trillion yuan will be used for local government debt swaps and bank recapitalization. Su said that local government funds may exceed 4 trillion yuan to support real estate. She did not specify within what time frame.
stock market divergence
Mainland China and Hong Kong Stocks fell on Wednesday as it became clear that Trump would win the election. U.S. stocks subsequently soared, with the three major stock indexes hitting record highs. Chinese stocks attempted to maintain modest gains in early trade on Thursday.
Ren Liqian, head of quantitative investment capabilities at WisdomTree, said this difference in stock performance shows that China’s stimulus measures “will be slightly larger than the baseline scenario.” She expects Beijing to increase support by about 2 trillion to 3 trillion yuan a year.
Ren Zhengfei is not expected to receive a significant increase in support due to uncertainty about how Trump might act. She noted that tariffs hurt both countries, but restrictions on technology and investment would have a greater impact on China.
During his first term as president, Trump blacklisted Chinese telecommunications giant Huawei, restricting its use of U.S. suppliers. The Biden administration has expanded those efforts to limit U.S. sales of advanced semiconductors to China and pressured allies to do the same.
Chris Miller, author of “Chip Wars,” noted earlier this year that both Democrats and Republicans support efforts to pass these new export controls and boost investment in U.S. semiconductor manufacturing. He expects the U.S. to increase such restrictions no matter who wins the election.
China is redoubling its efforts to develop its own technology by encouraging banks to lend to high-end manufacturing. But the country has long benefited from American capital and the ability to use American software and high-end parts.
Republicans reportedly on track to gain Senate majority within next two years NBC News Predictionsalthough control of the House of Representatives remains unclear.
“If Republicans take control of Congress, protectionist measures may accelerate, expanding their impact on the global economy and creating significant downside risks,” Su said.
She expects Trump may impose such tariffs in the first half of next year, possibly by invoking International Emergency Economic Powers Act or Section 122 of the Trade Act of 1974, which allows the president to impose tariffs of up to 15% on goods In response to serious international balance of payments deficits.
US data shows Trade deficit with China narrows From US$346.83 billion in 2016 to US$279.11 billion in 2023.
Su estimates that, assuming other factors remain unchanged, a 10% tariff on Chinese exports to the United States could reduce Beijing’s real GDP growth by an average of 0.3 to 0.4 percentage points over the next two years.
Customs data from Wind Information shows that China’s exports to the United States fell 14% to $500.29 billion last year. That’s still up from $385.08 billion in 2016, before Trump was sworn in for his first term.
Meanwhile, Chinese data showed that China’s annual imports from the United States increased from US$134.4 billion in 2016 to US$164.16 billion in 2023.
Other analysts believe Beijing will remain conservative and roll out stimulus gradually over the coming months rather than launching a massive stimulus package on Friday.
China’s top leaders usually meet in mid-December to discuss economic plans for the year ahead. Officials will then announce growth targets for this year at the annual council meeting in March.
“China may face higher tariffs from the United States next year. I expect China will also have a policy response when higher tariffs are imposed next year,” Zhang Zhiwei, chief economist at Pindian Asset Management, said in a report on Wednesday afternoon.
“I also don’t think the government will change the policies they have proposed to the National People’s Congress because of the U.S. election,” he said.
China’s growing global trade influence
Regardless of tariffs, China remains a major exporter in markets outside the U.S.
Senior economist Francoise Huang said: “China’s export destinations have indeed undergone some changes in the past few years. By 2023, the United States will account for less than 15% of China’s total exports, compared with an average of nearly 18% in the 2010s. ” Allianz Trade’s Asia-Pacific and global trading division said in September.
“While China has lost market share in the United States, it is clearly gaining market share elsewhere,” she said. “For example, China now accounts for more than 25% of ASEAN imports, compared with less than 18% in the 2010s.”
China’s exports to various countries have also grown A Federal Reserve report in August found that the products were being sold in the United States.
—CNBC’s Dylan Butts contributed to this report.
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