Trump Tariffs Could Cut China's Growth by More Than Half: Report
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The potential impact of President-elect Donald Trump's proposed tariffs on Chinese imports could be devastating for the Chinese economy, potentially pushing its growth rate below 2% by 2035, warns a new report from the Japan Center for Economic Research (JCER).
The report, released Wednesday, outlines two scenarios: a baseline scenario where Trump imposes 60% tariffs on Chinese goods and a risk scenario where retaliatory tariffs are implemented by trading partners.
In the baseline scenario, where no significant retaliatory measures are taken, China's GDP growth is projected to slow to 3.4% in 2025 from 4.7% this year. While a recovery to the 4% range is anticipated in 2026, the growth rate is expected to steadily decline, falling below 3% in 2030 and reaching a meager 1.8% by 2035.
"The impact of U.S. tariffs on Chinese exports will compound existing structural problems that are slowing the world's second-largest economy," the report states, citing a real estate slump and population decline as contributing factors.
The JCER predicts that 60% tariffs would lead to a nearly 14% plunge in Chinese exports, significantly exacerbating the existing economic challenges.
Trump's policies could also negatively affect the U.S. economy. The report's baseline scenario assumes the deportation of 1.3 million undocumented immigrants in 2025, leading to a slowdown in U.S. economic growth to 1.6% in 2025, down from 2.8% this year.
The risk scenario, which includes 60% tariffs on China, 20% tariffs on other economies, and the deportation of 2 million undocumented immigrants annually between 2025 and 2028, paints an even bleaker picture. In this scenario, global exports would be significantly lower than in the baseline scenario, with the U.S. suffering the most severe consequences.
"Countries with a high proportion of exports to the U.S., such as Canada, Vietnam and India, would be hit hardest," the report states.
The JCER report also outlines the potential impact on Japan, forecasting a decline in exports by about 2% if the U.S. imposes 10% tariffs.
To mitigate the risks associated with these potential scenarios, the JCER recommends bolstering free trade agreements across the Asia-Pacific region, citing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) as examples.