Chinese President Xi Jinping and former U.S. President Trump in Beijing, China, 2017.
Artem Ivanov | TASS | Getty Images
BEIJING – Goldman Sachs said Donald Trump's plan to impose 60% tariffs on Chinese goods could pose “significant downside growth risks” to China if he wins the U.S. presidential election.
Trump's chance More likely to become the next president After he survived Saturday's assassination attempt and two days later choosing former critic J.D. Vance as his running mate.
“Exports are a bright spot in China's economy right now, and I think policymakers may want to be prepared,” Shan Hui, chief China economist at Goldman Sachs, told CNBC's “Squawk Box Asia” on Tuesday.
“We're seeing talk of tariffs not just in the United States but with China's other major trading partners,” she said. “So this will not be a sustainable driver of China's economic growth.”
The United States is China's largest single country trading partner, while the European Union lags behind Southeast Asia as China's largest regional trading partner. Trump raised tariffs on Chinese goods when he was president in 2018 and threatened to raise tariffs to 60% if re-elected this fall.
Citigroup said the contribution of goods exports to China's real GDP growth in the second quarter of this year was the highest since the first quarter of 2022, when coronavirus restrictions limited domestic economic activity.
At the same time, Beijing's vigorous development of high-end manufacturing has not been able to fully offset the impact of the downturn in real estate and consumption.
Treasury Secretary Yellen and other U.S. officials said China’s policies to enhance industrial capabilities and technological self-reliance have led to Unemployment in the United States.
Is China the “biggest threat”?
In his first interview since being elected as Trump's running mate, Vance told Fox News that China is the “real problem” in the United States, not the war in Ukraine. poses the “biggest threat”.
The Biden campaign has Criticize Trump's choicessaid the choice was made intentionally “because Vance will do what Mike Pence would not do on January 6: go to any lengths to support Trump and his extreme MAGA agenda, even if it means breaking the law,” Regardless of the harm caused to the American people.”
On January 6, 2021, supporters of then-President Trump stormed the U.S. Capitol in an attempt to overturn the results of the 2020 presidential election.
Asked about Vance's comments, Chinese Foreign Ministry spokesman Lin Jian told a daily news briefing on Tuesday, “We have always Oppose making China a problem in American elections.
call for excitement
Goldman Sachs' Shan said the downside risks to a potential U.S. tariff increase under Trump mainly come from greater uncertainty and tighter financial conditions, as well as pressure on the yuan. She noted that the 2018 tariffs did not significantly weaken China's exports to the United States
However, recent data suggests that trade has slowed. In the first half of the year, China's exports to the United States grew slightly by 1.5%.
“Policymakers need to consider domestic demand and focus on factors that are more durable and sustainable for growth prospects,” Shan told CNBC on Tuesday.
If a 60% tariff were imposed, “that's quite high and we think the macroeconomic impact would be quite significant,” she added.
So far, China has refrained from stimulus measures. China's top leaders will convene the much-anticipated Third Plenum of the Central Committee of the Communist Party of China in Beijing this week, where they are expected to set long-term economic policy goals.
Citi analysts said on Monday that weak retail sales and disappointing second-quarter growth were not enough to convince Beijing to step up support for the economy.
“Policymakers are likely to tolerate short-term weakness amid structural shifts in the real estate sector,” analysts said. “More concerns about trade and foreign relations may also lead China to save policy space for the future.”
Citigroup expects China’s real GDP to grow by 5.0% this year.
China's dollar-denominated exports grew 3.6% in the first six months of this year as global demand for Chinese goods has been better than expected in recent months.
“Manufacturing and infrastructure investment are likely to remain strong, exports should maintain decent (year-on-year) growth in (the third quarter), and shipment orders may be brought forward (in the second half) due to concerns.” Chief China Economist Wang Tao said in a note on Tuesday.
She said Chinese authorities may be reluctant to roll out major stimulus measures in the coming months to conserve resources in the face of a weaker economy and increased tariffs.
UBS expects China's economy to grow by 4.9% this year.
Trump is a dealmaker
However, not all analysts believe that Trump's possible election as president would be detrimental to China.
Ben Harburg of Corevalues Alpha told CNBC on July 4 that he believed China was more likely to achieve “positive” trade results during Trump's presidency, given the “transactional nature” of the former president.
“He's a dealmaker, and like any negotiator, he likes to set the bar low, set the price low, and then work his way up from there,” the portfolio manager said at “Asian road sign.
When talking about foreign policy, Harberger pointed out that another term for Biden also means continuing to impose tariffs and “intruding on China's domestic problems”, which will not significantly improve the Chinese economy, nor will it significantly improve Sino-US relations.
He said Trump's partnership with China would mean “more binary potential for positive outcomes for China.”
CNBC's Sonia Heng reported from Singapore.