HONG KONG — President-elect Donald Trump has threatened to impose tariffs of up to 60% on all products imported into the United States from China. That may sound like a powerful economic threat for a country with already sluggish economic growth, but is it actually exactly what China needs?
Chen Chi-wu, a top finance professor at the University of Hong Kong and a former professor at the University of Hong Kong, said: “While we expect the US-China economic relationship to become even more unstable under the Trump administration, it may be a positive direction for China overall. I don’t think I can,” he said. Yale University told CBS News.
Chen said that if President Trump carries out his threat to impose such hefty tariffs on China, “the leadership in Beijing, especially given that China’s economy is currently in great difficulty, will may have no choice but to focus on the economy.” . ”
Since President Trump took office in his first term in the White House, China’s economic growth rate has slowed from about 7% to 4.5% throughout President Biden’s term. The country’s real estate market has crashed due to massive overbuilding, and ghost cities of vacant land are emerging. In September, the youth unemployment rate hit a record high of nearly 19%, dimming the outlook for China’s future workforce.
Over the past decade, the Chinese government has focused on strengthen military power Opportunities for domestic economic growth are being further sacrificed to achieve geopolitical ambitions to rival the United States, European and Asia-Pacific allies, Chen said.
“If you count the number of warships, China has by far the most warships of any country, even more than the United States.What is the industry that has grown the most so far this year? ?Certainly those war-related industries have declined,” he said, “but these consumer-facing industries are not growing or experiencing negative growth.”
Most of China’s top 20 aerospace and defense stocks posted double-digit growth in the past year alone.
Are tariffs “good for China in the long run”?
Wang Xiangwei, former editor-in-chief of the Hong Kong-based newspaper South China Morning Post, agreed: “The pressure the US is putting on China will be good for China in the long run.”
Wang told CBS News that over the past 40 years, since former leader Deng Xiaoping initiated reforms and began opening up the country, China has relied on two key drivers to support rapid economic growth. These companies have long exploited China’s cheap labor to make cheap exports for the world, then spend billions of dollars on domestic infrastructure such as roads, railways and airports.
But the rise of China’s burgeoning middle class is driving up labor costs, leaving governments running out of new construction across the country.
Meanwhile, the Chinese government is finding it difficult to activate a third engine of potential economic growth: the ability of its 1.3 billion people to consume domestically produced products.
President Trump’s tariff threats could provide the outside pressure needed to change the situation, Wang said.
“I believe that in the short term, China will suffer. In the long term, he (Trump) will take care of China’s pain,” Wang said, noting that in the United States, domestic consumption accounts for 70 to 80 percent. It will support a transition involving Although it accounts for a high proportion of a country’s GDP, in China it is “only about 60%.”
In effect, encouraging Chinese citizens to buy more of the country’s goods and services could be Beijing’s best defense against Trump’s threatened tariffs, in the view of two analysts.
“The best measure would be to stimulate consumption growth within China,” Chen said. “Right now, the leadership is not trying to help Chinese consumers by sending them government checks or even taxes to businesses. If the Chinese government really moves more aggressively in that direction, China’s I think it will lead to higher profitability for the economy, creating more domestic consumption demand to compensate for the potential loss of exports to the United States. ”
China needs the US, but tariffs could have complex effects
In his first term, President Trump imposed tariffs of 10% to 25% on Chinese agricultural products (seafood, pork, dairy products, etc.) imported into the United States. The Chinese government retaliated with its own tariffs, starting a trade war between the world’s two largest economies.
But nearly eight years later, China’s close economic ties to the United States appear to have diminished its ability to wage such a war.
“In terms of retaliatory options against China, we are very limited,” Chen said. “China imports large amounts of agricultural products such as soybeans and corn. China may try to import more of those products from Brazil and Russia as a way of retaliating against the United States, but ultimately , China imports a lot of agricultural products, “a lot of (computer) chips from Nvidia, Intel, and especially Qualcomm,” Wang said. “Those products are what China needs. Therefore, China cannot produce them domestically.”
Indeed, if the Chinese government imposes retaliatory tariffs, it could go against the proverb. Tariffs will make all of these products, which are essential to China’s continued economic and technological development, more expensive for its citizens.
But another possible effect of President Trump’s anticipated protectionist policies may actually be to bring some of America’s oldest allies and trading partners closer to China, a move the United States has pursued under Biden. This may mean reversing the so-called decoupling of the US and Western European economies from China.
“The Biden administration has done a very good job of more or less bringing it together,” Chen said. “If President Trump upsets the EU and NATO members, it increases the likelihood that Germany, France, Italy, and even the UK will develop friendlier trade relations with China. So, to some extent, that may help neutralize them. The expected negative impact of President Trump’s tariffs on Chinese products. ”
Mr Trump is repeatedly insisted Many economists disagree and say that foreign companies will foot the bill and effectively absorb the additional costs of exporting to the U.S. market imposed by the president’s tariffs. Effectively a tax on American consumers.
A survey released last week by the National Retail Federation found that if a 60% blanket tariff were imposed on Chinese goods, U.S. consumers would be more willing to pay more for everything from clothing and toys to appliances and travel goods. This could mean a loss of between $46 billion and $78 billion in purchasing power per year. .
“Retailers rely heavily on imported products and manufactured parts to offer customers a variety of products at affordable prices,” said Jonathan Gold, vice president of supply chain and customs policy at NRF. . “Tariffs are taxes paid by U.S. importers, not by foreign countries or exporters. These taxes ultimately come out of consumers’ pockets through higher prices.”
That said, despite President Trump’s previous anti-China rhetoric, it remains unclear how quickly the administration will actually move to impose comprehensive tariffs, and some economists believe that the next president We suspect that China plans to use this threat, at least initially, as a cudgel to negotiate more favorable trade terms with the Chinese government. President Trump may also choose to phase in tariffs to delay their full impact on China’s economy.
Will China attack Taiwan? Will Trump come to the rescue?
President Trump’s return to the White House may also lead to China further increasing its interests with Taiwan. Taiwan is a democratically ruled island of 23 million people located just off China’s east coast that China considers a renegade province. President Xi Jinping has vowed to return Taiwan to Chinese government control, even by force if necessary.
Since the US government enacted the Taiwan Relations Act in 1979, the US has made strategic efforts to assist in the defense of Taiwan in the event of some kind of invasion, including selling arms to the Taiwanese government.
However, what is open to interpretation and intentionally left vague in U.S. law is whether the U.S. government is obligated to use U.S. military power to directly defend Taiwan if it is attacked. It is.
President Biden said during his first term that the U.S. government would do so, breaking a long-standing policy of “strategic ambiguity” that President Biden later reinstated.
“Sovereignty over Taiwan is an insurmountable line within an insurmountable line,” Wang told CBS News. “In his presidential campaign speech, Trump made it clear that he was unlikely to send troops to defend Taiwan.”
“I believe that China will not invade Taiwan in the near future,” Wang added, noting that China “has many problems that need to be resolved domestically.”
If China were to invade Taiwan, the effects would be felt all over the world.
“If that happens, the global economy will suffer a devastating blow,” Chen said. “I hope that doesn’t happen. So perhaps now, given the challenges in China’s economy, the leadership is saying that without a stable economy, all global geopolitical ambitions are They’re realizing that they don’t have an economic base.”
Alain Sherter contributed to this report.
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