China's economy faces significant challenges from U.S. tariffs, highlighting vulnerabilities like local debt and a struggling property market.
China's strategic retaliation in the trade war utilizes historical context and targeted sectors, affecting global trade dynamics and market relationships.
Deep dives
China's Economic Resilience Amid Tariffs
China's economy faces challenges due to increasing tariffs from the United States, which could significantly impact its growth targets. Before the tariffs were imposed, China's growth was showing signs of resilience, buoyed by stimulus measures to combat deflation and maintain growth. Economists highlighted that while China's growth rate reached 5.4% in the first quarter, underlying issues such as local government debt and a struggling property market remain major concerns. The Chinese leadership is aware of these vulnerabilities and has prepared responses to manage the economic fallout from the trade war.
Strategic Trade Responses
China's retaliation to U.S. tariffs has been measured and strategic, targeting sectors of the U.S. economy that would generate political pressure, such as agriculture. Historical context plays a significant role in China's response, as its leaders perceive ongoing trade negotiations through the lens of past encounters with Western powers. China has also adjusted export practices to divert sales through Southeast Asian countries, like Vietnam, which complicates U.S. tariffs' effectiveness. However, the potential for strategic mineral restrictions indicates China has additional leverage that it could use against the U.S., further complicating the trade dynamics.
Global Trade Implications
The ongoing trade conflict between the U.S. and China has far-reaching implications for global trade, with projections suggesting a potential decline in global goods trade. This situation could push numerous economies, including the UK, closer to recession as costs of goods rise due to tariffs. The trade war may also lead to shifts in market dynamics, pushing products into different regions and affecting less developed countries that rely on their export markets. Ultimately, the complex interplay between these two economic giants could redefine global trade relationships, as other nations navigate the repercussions of the U.S.-China trade dispute.
President Trump’s fury with China shows no sign of abating. High tariffs - first imposed by the US but now on both sides - are giving way to a very real trade war between the world’s two biggest economies. China’s President Xi Jinping is refusing to blink - so far - and in the past week he's been on the road in South East Asia, visiting Vietnam, Cambodia and Malaysia. Where this goes now depends in large part on China's calculations about the capacity and determination of both sides to endure a trade war. So what cards does China hold ? And what are the implications for China's own economy and for the rest of us?
Guests:
Damien Ma, Economist, Kellogg School of Management, Chicago
Rana Mitter, ST Lee Chair in US-Asia Relations at the Harvard Kennedy School
Isabel Hilton, visiting Professor at the Lau China Institute, King's College, London
David Henig, Director of the UK Trade Policy Project
Presenter: David Aaronovitch
Producers: Caroline Bayley, Kirsteen Knight, Lucy Pawle
Production co-ordinator: Gemma Ashman
Sound Engineer: James Beard
Editor: Max Deveson
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