Trump Victory Spurs Fears of New Tariffs, China Poised to Unveil Major Stimulus
By Okafor Joseph Afam
November 7, 2024
BEIJING — With Donald Trump’s 2024 presidential win, expectations are high for China to announce fresh fiscal stimulus plans, anticipated as soon as Friday. Throughout his campaign, Trump vowed to implement tariffs as high as 60% on Chinese goods entering the United States. During his first term, he raised duties by at least 10%, but despite this, the U.S. remained China’s largest trading partner.
Now, potential new tariffs would strike at a critical moment for China. Faced with a struggling real estate sector and weak consumer spending, China is increasingly dependent on exports for economic growth. Zhu Baoliang, former chief economist at China’s economic planning agency, warns that if tariffs rise to 60%, China could see a $200 billion drop in exports, leading to a 1 percentage point hit to GDP.
Since September, Chinese policymakers have stepped up efforts to stimulate growth. This week, China’s National People’s Congress is expected to approve a new round of fiscal support. Economist Yue Su from the Economist Intelligence Unit noted that the alignment of the NPC meeting with Trump’s election victory suggests China is poised to act swiftly. She expects a stimulus package worth over 10 trillion yuan ($1.39 billion), primarily for local government debt swaps, bank recapitalization, and bonds aimed at stabilizing the real estate sector.
Market Divergence
Following Trump’s win, Chinese and Hong Kong stocks fell, while U.S. markets surged to record highs. The contrast in market response signals that China’s fiscal stimulus will likely exceed baseline forecasts. Liqian Ren of WisdomTree predicts a 2-3 trillion yuan boost per year, though uncertainty around Trump’s policies may keep China cautious. She highlighted that while tariffs hit both nations, tech restrictions have impacted China more significantly. Trump’s first term saw U.S. restrictions on Huawei, expanded by the Biden administration to cover semiconductor exports.
Chris Miller, author of Chip War, noted that bipartisan support for tech controls means such policies will likely intensify, regardless of who holds office. China, in response, has boosted funding to high-end manufacturing but still depends heavily on U.S. capital and advanced tech.
With Republicans expected to gain control of the Senate, Su cautioned that this shift could accelerate protectionist policies, potentially disrupting the global economy. She expects Trump to introduce tariffs early next year, potentially through the International Emergency Economic Powers Act or Section 122 of the Trade Act of 1974.
China’s Export Shift
Despite tariffs, China’s export prowess has expanded to regions outside the U.S. Allianz Trade economist Francoise Huang noted that China now supplies over 25% of ASEAN imports, up from less than 18% a decade ago. Although the U.S. share of Chinese exports has shrunk, China has gained influence across Asia.
While Beijing’s stimulus plans may become clearer on Friday, experts expect more modest, phased support into next year.
