Tom Orlik, chief economist at Bloomberg Economics, and Mackenzie Hawkins discuss the potential impacts of a Trump or Biden victory in the 2024 US election on China's economy. Topics include the US-China trade war, manufacturing, national security, impact of tariffs on inflation and trade, challenges in clean energy transition, and Chinese EV boom.
The US election in 2024, particularly a potential Trump victory, poses a threat to China's economy and could lead to the emergence of East-West trade blocks.
Tariffs imposed by the Trump administration on Chinese exports to the US have had a significant impact on Chinese sales, and if Trump's proposed 60% tariffs were implemented, it would have a catastrophic effect on trade between the two countries and other economies as well.
Deep dives
China's Economy and US Election: A Threat on the Horizon
The US-China relationship is increasingly strained, with both Joe Biden and Donald Trump backing policies that drive the two countries further apart. The US government's tough stance on China has led to tariffs and export controls on Chinese goods and technology, which have had a negative impact on China's economy. The US election, particularly a potential Trump victory in 2024, poses another threat to China's economy and the global economy. With both countries imposing tariffs and increasing tensions, American consumers may experience higher prices for everyday goods, while other economies could suffer as well. The alignment between China and Russia adds a new dimension, with the possibility of the emergence of East-West trade blocks. Overall, the current consensus in Washington is that some form of trade restrictions on China are necessary, and the debate is now focused on the extent and effectiveness of those restrictions.
The Impact of Tariffs: Decreased Demand and Disrupted Trade
Tariffs increase the cost of imports, leading to a decrease in demand for those goods. The 25% tariffs imposed by the Trump administration on Chinese exports to the US have already had a significant impact on Chinese sales to the US. If Trump's proposed 60% tariffs were to be implemented, it would have a catastrophic effect on trade between the two countries. While tariffs can have a positive impact on inflation by increasing import costs, it can also depress economic growth. Tariffs not only affect the bilateral trade between the US and China, but also have broader implications for other economies and industries, such as Mexico, which has seen a surge in imports to the US as an alternative to Chinese goods. The complexity of global trade and supply chains makes it difficult to impose tariffs without unintended collateral damage.
Strategic Concerns and Industry Competition
The US-China trade tensions are driven by strategic concerns and competition in key industries. The US is investing heavily in industries of the future, such as semiconductor chips, electric vehicles (EVs), and clean energy. The fear is that China's industrial prowess and lower costs could undermine US efforts in these sectors. China's ability to pour significant resources into strategic areas of the economy through targeted industrial policies raises concerns about its competitive advantage. While tariffs and export controls have been used to restrict China's access to advanced technologies, the Biden administration is also exploring novel tools such as export controls on semiconductors and other critical components. There is growing recognition in the US and among its allies that China poses significant risks, not only in terms of market dynamics but also information security and national defense.
Public Opinion and the Impact of US Election
Public opinion in China regarding the US election indicates that about 60% of respondents preferred Trump, not because his policies were more favorable for China, but because they believed he would bring chaos to America and ease pressure on China. The issue of China is one where bipartisan consensus exists in the US, with both sides agreeing on the need to address China's economic practices and strengthen national security measures. The emergence of a potential east-west trade bloc, with China aligning more closely with Russia, adds to concerns about the impact of trade restrictions and the ability of the US and its allies to shape outcomes through economic statecraft. The dynamics of the US-China relationship and its implications for the global economy will continue to evolve, influenced by the US election and ongoing policy decisions.
China’s economy has been in rough shape, and the government is trying to address it. But there’s another threat on the horizon: the US election.
During their presidencies, both Joe Biden and Donald Trump backed policies that drove the US and China further apart.Now, they're both campaigning for re-election on continuing on that trajectory.
In this episode, Joe Weisenthal and Tracy Alloway from the Odd Lots podcast speak with Tom Orlik, chief economist at Bloomberg Economics, and Mackenzie Hawkins, US industrial policy reporter for Bloomberg News. They’ve measured what a Trump or Bidenvictory in 2024 could mean for China’s economy, and beyond. Subscribe to Odd Lots to get all of their episodes.