On February 7th, 2025, the Chinese flag flapping wings on a boat near a shipping container at Yangshan Port overseas, China.
I’m going to Nakamura | Reuters
BEIJING – China’s response to new US tariffs is likely to focus on domestic stimulation and strengthening relationships with trading partner partners, according to a China-based analyst.
Hours after President Donald Trump announced an additional 34% tariff on China, the Chinese Commerce Department called on the US to cancel the tariffs and vowed to unspecified measures. The US’s massive policies also slapped new obligations to the European Union and major Asian countries.
Exports to China to China this year have already reached 20% due to additional tariffs, increasing the total rate of shipments from China to 54% amid the highest imposed by the Trump administration. The effective rates for individual product lines may vary.
But as before, the closure of China’s statement was a call for negotiations.
“I don’t think the focus of China’s response in the near future will be retaliatory tariffs or any such measures,” said Bruce Pan, assistant professor at CUHK Business School. This is due to CNBC translation of the Chinese statement.
Instead, Pang hopes that China will focus on improving its country’s economy and double its prioritization of promoting domestic consumption by diversifying its export destinations and products.
China, the world’s second largest economy, has stepped up its stimulus efforts since September by increasing its fiscal deficit, increasing its trading subsidy programme for consumption, and calling for a halt of the real estate recession. In particular, Chinese national president Xi Jinping held a rare meeting in February with high-tech entrepreneurs, including Alibaba founder Jack Ma, in a show of support for the private sector.
Macquarie’s chief China economist Larry Who said in a report ahead of Trump’s latest tariff announcements on policy reversals have been driven by regulatory tightening in recent years. He pointed out that the 2021 pandemic-induced export boom allowed Beijing to “launch a massive regulatory campaign.”
“My views remain the same,” Hu emailed Thursday. “Beijing will use domestic stimuli to offset the impact of tariffs, allowing it to achieve its “approximately 5%” growth target. ”
Hu expects that instead of retaliatory tariffs, Beijing will focus on still using key minerals and probe export controls to Chinese foreign companies. Hu also expects China to keep strong against the US dollar and lower prices to resist calls from retailers – as a way to put inflationary pressure on the US
In early March, China’s top leader announced that he would pursue a growth target of around 5% of gross domestic product this year. The Treasury also suggested that financial support could be increased if necessary.
According to Goldman Sachs, about 20% of China’s economy relies on exports. They previously estimated that around 60% new US tariffs on China would reduce actual GDP by about 2% points. The company still maintains its full year forecast of GDP growth of 4.5%.
Changes in global trade
What’s different from the tariff impacts under Trump’s first term is that China is not its sole goal, but one of the strips of countries facing exports to the US.
Cameron Johnson, a senior partner based in Shanghai, consulting firm Tidalwave Solutions, said at Yiwu’s China export hub on Thursday, it appears that the impact of the new US tariffs has not been criticized for the impact of the new US tariffs.
He previously pointed out that the US had focused on trade measures on removing China from its supply chain and forcing businesses to go to other countries. However, he said Chinese manufacturers were expanding overseas as they diversified.
“The reality is this [new U.S. tariff policy] “It essentially provides much of Asia and Africa to China, and the US is not ready,” Johnson said. He expects China will not be unnecessarily difficult for US companies operating domestically, and will instead try harder to build other trade relations.
Since Trump’s first four-year term ended in early 2021, China has significantly increased its trade with Southeast Asia, which is now Beijing’s biggest trading partner, followed by the European Union and the US.
Ten member states of the Association of Southeast Asian Countries (ASEAN) (ASEAN) have joined China, Japan, South Korea, Australia and New Zealand, which form the world’s largest free trade bloc.
“RCEP countries naturally deepen their trade relations with one another,” Yue Su, the Chinese chief economist with the Economist Intelligence Unit, said in a memo on Thursday.
“This is also because China’s economy is likely to be the most stable in relative terms given the government’s strong commitment to growth targets and the readiness to deploy fiscal policy measures where necessary,” she said.
Uncertainty remains
The extent to which all countries will be slapped at this week’s tariffs remains uncertain, especially as Trump is widely expected to use his duties as a negotiation tactic with China.
He said last week that the US could lower Chinese tariffs and help the Beijing ordinance to sign a deal to sell Tiktok’s US business.
However, the new tariff levels on China were worse than many investors expected.
“Unlike some of the optimistic market forecasts, we don’t expect any spectacular US and China bargains,” Nomura’s Chief China Economic Director Lu said Thursday.
“We expect the tension between these two megaeconomies to be significantly worsened, especially as China has made significant progress in the high-tech sector, including AI and robots,” he said.
