While the president’s hardball stance has brought China to the table, experts fear his rhetoric could drive them away
Since President Donald Trump started jacking up tariffs on China last year, he’s argued that the U. S. has the upper hand in negotiating with Beijing. He may be right — new numbers on consumer spending and industrial production show the Chinese economy continuing to slow, in part because of the ongoing trade war between the world’s two largest economies.
“One thing is for sure, the recent trade tensions have caused real damage to the manufacturing sector, exports, production and, most worrying, investment,” analysts Wei Yao and Michelle Lam of Societe Generale said in a research note assessing China’s latest economic data.
By most measures China remains enviably vibrant: Over the first three months of 2019, its economy grew 6.4% from a year ago — more than twice as fast as the U. S. grew. Nor are Mr. Trump’s tariffs the main cause of China’s troubles. Its economy has been slowing for years as the country shifts away from manufacturing toward consumer spending, while the most recent dip has more to do with the Chinese central bank’s reluctance to ease interest rates even as growth cools.
Still, cracks are visible:
The Trump administration is piling on the pressure in proposing to impose a 25% tariff on an additional $325 billion in Chinese goods as early as next month. That could reduce China’s GDP by almost 1 percentage point, according to UBS, while also weighing down trade activity worldwide.
“A further 25% U. S. tariff on $300 [billion] worth of goods would make global trade burn in a way that only ‘Game of Thrones’ watchers could understand,” Freya Beamish, chief Asia economist with Pantheon Macroeconomics, said in a report.
