China Faces Economic Challenges as Trump’s Election Win Raises Trade Tensions
As China gears up to introduce fresh measures aimed at reinvigorating its economy, Donald Trump’s unexpected election victory poses a serious obstacle. With plans for a second term, Trump is calling for import tariffs as high as 60% on Chinese products, potentially stymieing Xi Jinping’s vision of transforming China into a global tech leader.
China’s economy, already struggling due to a property crisis, rising debt, high unemployment, and sluggish consumer spending, has yet to bounce back to pre-pandemic growth levels. The stakes are high for China’s leaders, who are expected to announce new economic policies soon, with the National People’s Congress (NPC) Standing Committee taking the lead.
During his first presidency, Trump imposed tariffs of up to 25% on Chinese imports, measures the Biden administration chose to uphold, and in some cases, expand. Now, Trump’s return could add new pressure to China’s economy, which is already on fragile ground. China analyst Bill Bishop believes Trump will follow through on his threats, convinced that Beijing has failed to fulfill previous trade promises and that the pandemic hurt his reelection chances.
Economic indicators paint a challenging picture: after China abruptly ended its strict COVID-19 restrictions, many anticipated a swift economic revival, but the country has instead faced slower growth and a series of underwhelming financial reports. The International Monetary Fund (IMF) recently lowered its growth forecast for China to 4.8% for 2024, slightly below the government’s goal of around 5%, with growth expected to dip to 4.5% in 2025.
Despite slower growth, China has tried to shift its economy away from rapid expansion towards “high-quality development,” focusing on advanced manufacturing and green industries. While the government hopes these high-tech exports can sustain economic progress, some economists, including Morgan Stanley Asia’s former chairman Stephen Roach, argue that China should pivot toward boosting domestic consumption rather than relying solely on exports. A shift to a consumer-driven economy, Roach says, could not only create sustainable growth but also reduce trade tensions and shield China from external pressures.
Yet, as China emerges as a leader in clean energy sectors like solar panels, electric vehicles (EVs), and lithium-ion batteries, it faces new challenges abroad. According to the International Energy Agency (IEA), China produces over 80% of the world’s solar panels and is the largest EV manufacturer. In 2023, exports of these high-tech products grew 30%, surpassing one trillion yuan ($139 billion). These advances have offered some relief from domestic economic struggles, but they also invite resistance from trading partners. The European Union, for instance, recently raised tariffs on Chinese EVs to as much as 45%, signaling that Western markets may be less willing to absorb Chinese goods.
With Trump preparing to reimpose strict tariffs on Chinese imports, Beijing must assess whether its latest policies will be enough to bolster an economy at a crossroads. If China can’t pivot fast enough, it may face long-term stagnation, similar to the prolonged economic slump Japan experienced after its bubble burst in the 1990s.
