What is the future of relations between China and America during the Trump era?
Customs tariffs on China
Economist Intelligence expectations are assumed to have an increase of 20% in the actual customs tariff rate on Chinese exports to the United States, which may lead to a reduction in China’s gross domestic product by 0.6% from 2025 to 2027.
Secondary effects on investing in manufacturing and local consumer morale would work to weaken economic growth more. If Donald Trump imposes a threat to impose customs duties by 60% on China, the total impact on GDP growth may be a loss of 2.5% during the period between the period between 2025-2027, as the abolition of the preferential commercial situation of China would indicate a significant deterioration in bilateral relations.
China is likely to respond to the imposition of moderate and targeted customs duties with dependence primarily on non -customs measures, and it is unlikely that a trade agreement focuses on reducing trade.
More challenges for China’s economy
Next US President Trump is scheduled to impose additional customs duties on goods imported from China after taking office and this would impose a major external challenge on China’s economy in the period 2025-2026.
In Economist Intelligence analysis, a number of scenarios of customs tariffs have developed the inability to predict Trump’s policies.
The evaluation is partially based on the trade war between the United States and China during the era of President Trump I, which brought the average customs definition of the United States against Chinese products imported from less than 3 % in 2017 to 10.3 % in 2023.
How will Trump’s moves affect China?
American customs duties are expected to affect the Chinese economy directly through exports, as well as second -class effects on industrial investment and local consumer morale.
Also read: China is trying to protect its economy in the second period of Trump
To what extent do American imports respond to customs duties changes (such as flexibility) is crucial in determining the impact on the volume of trade.
Flexibility indicates the amount of consumers and companies replacing Chinese goods with the commodities of other countries. When customs duties increase, the more flexibility increases, the greater the sensitivity of customs duties on Chinese goods.
Although the actual customs tax rate on Chinese goods in the United States was 19.3%, according to the Peterson Institute for International Economy, we appreciate that the actual customs tax rate on Chinese goods reaches only 10.3% by 2023.
The main scenario of the relationship of China and America
In the primary scenario, analysts assume that the United States will raise the actual customs tariff rate on Chinese goods with a total of 20 % during the period 2025-2027. The actual customs tariff rate on China is expected to increase by 5-10 % in 2025 due to the imposition of customs definitions related to fentian smuggling conflicts.
Also read:
Trump will gradually impose customs tariffs from late 2025 with a broader set of excuses and policy tools, ultimately raising the actual customs tariff rate on Chinese exports to about 30% by 2027.
China’s exports to America decrease
A 20% decrease in China’s exports to the United States is expected to occur during the period 2025-2027, with a feeling of most impact in 2026.
Chinese exports will show some flexibility in 2025 due to the pre -commercial loading and the intuition of trade in the beginning and the gradual nature of the imposition of customs tariffs.
The contraction in China’s exports to the United States would in itself reduce the growth of GDP by about 0.6 % during the period from 2025 to 2027 with a feeling of most impact in the period 2026-2027.
The burden on the economy in 2025 comes more than the trauma that was made by investment and consumption, and with the acceleration of things, the effects will become more clear, which weakens the growth of GDP more during the period from 2028-2029.
Impact on the value of the Chinese yuan
It is expected that the yuan or rhymenebi is partially absorbed, but the currency will not decrease excessively, due to the increasing priority of the stability of the currency, but the renminbi will become more volatile and decrease to 7.45 renalbi against the dollar by the end of 2026 and policymakers will interfere at critical exchange rate levels to prevent the cycle of decline.
Chinese stimulation package
China will carry out an economic motivation package in early 2025 with a focus on higher levels of financial expansion and reduction in monetary restrictions, and the total size of the stimulus package is 4.1 trillion Chinese yuan annually or 3.2% of the nominal GDP in 2023.
The real GDP growth is expected to slow 4.6% in 2025, 4.3% in 2026, and 4.1% in 2027, as incentives partially reduce customs tariffs.
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