In 2019, Donald Trump and Xi Jinping were last seen face-to-face at a pivotal meeting that underscored the complexities of US-China relations.
As China prepares for a potential second Donald Trump presidency, it is poised to reveal a series of new economic measures aimed at revitalizing its sluggish economy.
Trump’s previous election campaign was characterized by a staunchly protectionist stance, which included proposals for steep import tariffs, potentially reaching as high as 60% on goods manufactured in China.
Following his anticipated election victory, Xi Jinping’s ambitious plans to elevate China into a global tech powerhouse are likely to face substantial obstacles, further exacerbating tensions between the world’s two largest economies.
China’s economy has been hampered by a troubling combination of a property market downturn, escalating government debt, rising unemployment, and sluggish consumer spending, all of which have contributed to a waning economic recovery since the pandemic.
Consequently, the upcoming announcements from the Standing Committee of the National People’s Congress (NPC) carry unprecedented importance, as they seek to address these mounting challenges.
During his first term, Trump instigated tariffs on Chinese imports of up to 25%, leaving a lasting impact on the trade dynamics between the two countries.
China analyst Bill Bishop emphasizes the seriousness of Trump’s intentions regarding tariffs, suggesting a genuine belief that China has failed to honor past trade agreements.
He remarked, “I think we should believe that he means it when [he] talks about tariffs, that he sees China as having reneged on his trade deal, that he thinks China and Covid cost him the 2020 election”.
Despite Trump’s departure from the presidency in 2021, pressure from Washington persisted; the Biden administration opted to maintain, and in some instances expand, existing tariff measures.
While the initial wave of Trump tariffs inflicted considerable pain on China, the nation now finds itself in a significantly more precarious economic position.
Since relaxing its stringent Covid restrictions two years ago, China has struggled to regain its pre-pandemic growth levels, often disappointing expectations for a swift recovery.
Prior to Trump’s latest electoral prospects, the International Monetary Fund (IMF) revised its growth forecasts for China downwards, reflecting persistent economic concerns and challenges.
The IMF’s revised expectations now indicate that China’s economy is projected to expand by only 4.8% in 2024, falling at the lower end of Beijing’s own growth target of “about 5%.” Additionally, the IMF anticipates a further decline in growth to just 4.5% in the subsequent year.
However, China’s leadership anticipated the end of decades of explosive growth, as President Xi had previously articulated a vision of transitioning the economy towards “high-quality development” back in 2017.
This concept has been frequently invoked by Chinese officials to emphasize a shift towards an economy more heavily reliant on advanced manufacturing and sustainable industries.
Nonetheless, some economists argue that merely relying on exports won’t steer China away from its current economic troubles.
Morgan Stanley’s former chairman for Asia, Stephen Roach, warns that China risks experiencing protracted stagnation akin to Japan’s economic malaise following the 1990s bubble burst.
To circumvent such a scenario, Roach advocates for tapping into “untapped consumer demand” and a strategic pivot away from growth models centered on exports and investments.
Shifting to this more robust economic framework could bolster China’s defenses against potential threats posed by Trump’s anticipated return to power.
New economy, old problems
China has been striving to replicate its longstanding role as the global factory for low-cost goods by pivoting towards high-tech exports.
It is already recognized as a global leader in the production of solar panels, electric vehicles (EVs), and lithium-ion batteries, marking a significant evolution in its manufacturing capabilities.
As per the International Energy Agency (IEA), China now constitutes at least 80% of the world’s solar panel output and has positioned itself as the foremost manufacturer of both electric vehicles and their batteries.
According to an IEA report from last year, Chinese investments in clean energy represented a third of the total worldwide, highlighting the nation’s remarkable strides in enhancing its renewable energy capacity.
David Lubin, a senior research fellow at the London-based think tank Chatham House, asserts, “For sure there is an overall effort to support high-tech manufacturing in China.” He further notes, “This has been very successful.”
Notably, exports of electric vehicles, lithium-ion batteries, and solar panels surged by 30% in 2023, eclipsing one trillion yuan ($139 billion; £108 billion) for the first time and reinforcing China’s standing in these sectors.
The buoyant export performance has somewhat mitigated the adverse effects of an ongoing property market crisis on the Chinese economy.
However, as these export levels rise, so too does the pushback from Western nations against Chinese goods, signaling a shift in global trade dynamics.
Just last month, the European Union imposed tariffs on Chinese-produced electric vehicles as high as 45%, revealing mounting protectionist sentiment in global markets.
Katrina Ell, research director at Moody’s Analytics, points out, “The problem right now is that large recipients of those goods including Europe and the US are increasingly reluctant to receive them.”
As Donald Trump readies for a potential return to the Oval Office with a renewed commitment to imposing heavy tariffs on Chinese imports, Beijing must critically assess whether its latest economic measures will effectively address its growth challenges.
**Interview with China Analyst Bill Bishop on Trump’s Tariff Threats and China’s Economic Outlook**
**Host:** Welcome to our special segment. Today, we’re diving into the potential implications of a second Donald Trump presidency on U.S.-China relations, especially regarding tariffs. Joining us is China analyst Bill Bishop. Bill, thank you for being here.
**Bill Bishop:** Happy to be here, thanks for having me.
**Host:** So, let’s get right into it. Donald Trump has threatened to introduce tariffs of up to 60% on Chinese goods. How significant is this in the context of U.S.-China relations?
**Bill Bishop:** It’s very significant. Trump’s stance is consistent with his previous administration’s approach, which was heavily focused on protectionism. He believes China hasn’t honored past agreements, and he’s vocal about holding them accountable. His threats of high tariffs, if implemented, would represent a steep escalation in trade tensions.
**Host:** You mentioned that he sees China as having reneged on past deals. What impact would these tariffs have on China’s already fragile economy?
**Bill Bishop:** The impact would be severe. China is currently grappling with a range of economic issues, including a property market downturn and rising unemployment. High tariffs would further stifle exports, which could exacerbate these already troubling conditions. They are trying to pivot towards high-quality development, but tariffs would be an obstacle to that ambition.
**Host:** Speaking of China’s economic challenges, the IMF recently lowered its growth forecasts for China. What do you make of that?
**Bill Bishop:** The IMF’s forecasts reflect ongoing concerns about China’s recovery since easing COVID restrictions. The expected growth of only 4.8% in 2024 indicates that the economy is not bouncing back as quickly as anticipated. Adding in the threat of higher tariffs could thwart any improvements and dampen consumer confidence.
**Host:** With Xi Jinping’s vision of turning China into a global tech powerhouse, how might these tariffs affect that trajectory?
**Bill Bishop:** Xi’s plans to elevate China in technology are ambitious. However, Trump’s tariffs could stymie these efforts. If the U.S. continues to impose heavy tariffs, it would hinder China’s ability to expand its tech sector and innovate, potentially trapping them in a cycle of economic stagnation.
**Host:** What strategies could China adopt to mitigate the risks posed by a potential Trump presidency?
**Bill Bishop:** China needs to tap into its untapped consumer demand and reduce reliance on exports. Shifting the focus toward sustainable growth and advanced manufacturing industries could help insulate the economy from external pressures. Also, fostering domestic consumption could create a more resilient economic framework.
**Host:** Bill, thank you for sharing your insights on this complex issue. With the election looming, it will be interesting to see how these dynamics unfold.
**Bill Bishop:** Thank you for having me. It’s certainly a critical moment for U.S.-China relations.