Experts say tariffs threatened by Trump could actually help Beijing weather economic storm

Hong Kong — President-elect Donald Trump has threatened to impose tariffs of up to 60% on all products imported into the United States from China. While this may seem like a major economic threat to a country where economic growth is already faltering, could this actually be exactly what China needs?

“I expect US-China economic relations to be more volatile under Trump, but I think overall it may turn out better for China,” said Chen Zhiwu, professor of finance at the University of Hong Kong and former professor at the University of Hong Kong. Yale University, told CBS News.

Chen said that if Trump followed through on his threat to impose such high tariffs on China, it “could force Beijing's leaders to have no choice but to focus on “economy – especially since the Chinese economy is currently in great difficulty.” “.

Since the start of Trump's first term in the White House and throughout President Biden's term, China's economic growth has slowed from about 7% to 4.5%. The country's real estate market has collapsed due to overbuilding, leading to the emergence of empty ghost towns. Youth unemployment hit a new high of nearly 19% in September, dimming the outlook for China's future workforce.

Beijing's intense attention over the past decade to strengthen your army To meet its geopolitical ambition to compete with the United States and its European and Asia-Pacific allies, it has further sacrificed opportunities for domestic economic growth, Chen said.

“If you count the number of warships, China has by far the largest number of warships than any other country, even more than US warships. Which industries have seen the strongest growth so far this year? Surely these war-related industries are gone.”

Most of China's top 20 aerospace and defense stocks recorded double-digit growth in the past year alone.

Customs tariffs “a good thing for China in the long term”?

“US pressure on China will become a good thing for China in the long run,” agreed Wang Xiangwei, former editor-in-chief of the Hong Kong-based South China Morning Post newspaper.

China has relied on two main engines to support rapid economic growth over the past 40 years, since former leader Deng Xiaoping launched reforms and began opening up the country, Wang told CBS News. They made cheap export products for the world by taking advantage of long-cheap Chinese labor, and then spent billions on national infrastructure, including roads, railways, railway and airports.

But labor has become more expensive with the rise of China's burgeoning middle class, and the government is running out of new projects to build across the country.

Meanwhile, Beijing has struggled to launch a third potential engine of economic growth: the ability of the country's 1.3 billion people to consume locally made goods.

Trump's threats of tariffs could provide a needed external push for that to change, Wang said.

“I believe China will suffer in the short term. In the long term, it [Trump] “We will help China make this painful transition,” Wang said, noting that in the United States, domestic consumption represents 70 to 80 percent of national GDP, while in China it represents “only about 60%.

Indeed, according to the two analysts, pushing the Chinese population to buy more goods and services from their own country could prove to be Beijing's best protection against Trump's threats of tariffs.

“The best tool would be to stimulate consumption growth in China,” Chen said. “So far, leaders haven't really tried to help Chinese consumers by sending them government checks and even corporate taxes. I think if the Chinese government really moved in that direction more aggressively, “then this would help the Chinese economy generate increased domestic consumption demand to offset some of their possible export losses to the United States.”

Beijing needs Washington, but tariffs could have a complex impact

During Trump's first term as president, he imposed tariffs ranging from 10 to 25 percent on Chinese agricultural products imported into the United States, including seafood, pork and dairy products. Beijing retaliated by imposing its own tariffs, sparking a trade war between the world's two largest economies.

However, almost eight years later, Beijing appears less capable of waging such a war, due to its close economic ties with the United States.

“In terms of China’s options for retaliation, they are very limited,” Chen said. “China imports a lot of agricultural products like soybeans and corn. It could try to import more agricultural products of this type from Brazil, but also from Russia, as a means of retaliation against the United States. But in the end account, China imports so much [computer] chips from Nvidia, Intel, especially Qualcomm,” Wang said. “These products are what China needs. China therefore cannot produce internally. »

Indeed, if Beijing imposes retaliatory tariffs, it could shoot itself in the foot. Tariffs would make all of these products, essential to China's continued economic and technological development, more expensive for its own population.

But another possible impact of Trump's expected protectionist policies could actually bring some of the United States' oldest allies and trading partners closer to China, reverse the so-called decoupling of the U.S. and Western European economies from Beijing, which Washington has pushed under Mr. Biden.

“The Biden administration has done a really good job of more or less unifying all of this,” Chen said. “If Trump angers EU and NATO member countries, this will allow Germany, France, Italy or even the UK to move closer to China on the front trade. This could therefore help to neutralize, to a certain extent, the negative impact of Trump's expected tariffs on Chinese products.

Trump has repeatedly requested that foreign companies would foot the bill, effectively absorbing the additional costs of exporting to the U.S. market imposed by its tariffs, but many economists disagree and believe that this be effectively a tax on American consumers.

According to results According to a statement released last week by the National Retail Federation, U.S. consumers could lose between $46 billion and $78 billion in purchasing power annually on everything from clothing and toys to appliances and home goods. travel, if there was a global customs duty of 60% on Chinese products.

“Retailers rely heavily on imported products and manufacturing components so they can offer their customers a variety of products at affordable prices,” said Jonathan Gold, vice president of supply chain and customs policy at the NRF. said. “A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter. This tax ultimately comes out of consumers' pockets through higher prices.”

That said, and despite Trump's history of anti-China rhetoric, it remains unclear how quickly his administration could actually impose drastic tariffs, with some economists speculating that the president-elect is considering, at least initially, to use customs duties. threat additional levies as a cudgel to negotiate more favorable trade conditions with Beijing. Trump could also choose to phase in the tariffs, delaying their full impact on the Chinese economy.

Will China attack Taiwan and will Trump come to its rescue?

Trump's return to the White House could also help Beijing advance its interests in Taiwan, the democratically governed island of 23 million off China's east coast that the country views as a renegade province. President Xi Jinping has pledged to return Taiwan to Beijing's control, by force if necessary.

Since the U.S. government enacted the Taiwan Relations Act in 1979, the United States has been strategically committed to assisting in the defense of Taiwan in the event of aggression, including selling arms to the island's government.

However, whether Washington is obliged to directly defend Taiwan, using the might of the US military, is open to interpretation and remains deliberately vague in US law, if attacked.

President Biden, during his first term, said Washington would do so, breaking with the long-standing policy of “strategic ambiguity” to which the Biden White House later returned.

“Sovereignty over Taiwan is the red line of all red lines,” Wang told CBS News. “Trump, in his presidential campaign speeches, made it very clear… [that he’s] it is unlikely to send troops to defend Taiwan.

“I believe China is not going to invade Taiwan anytime soon,” Wang added, noting that Beijing has “so many problems it will have to solve at home.”

If Beijing invaded Taiwan, the consequences would be felt around the world.

“This would deal a devastating blow to the global economy,” Chen said. “I hope that doesn't happen. So, maybe now, given the challenges in the Chinese economy, leaders realize that without a stable economy, all their global geopolitical ambitions would have no basis economic.”

Alain Sherter contributed to this report.