Commentary: How Should China Counter Trump’s Tariff War? (AI Translation)
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文｜财新周刊 王力为
By Wang Liwei, Caixin Weekly
在美国总统特朗普祭出引发全球恐慌的“对等关税”一周后，4月9日他宣布，暂缓对三分之一的美国贸易伙伴实施差异化高关税；接下来90天内，中国以外的贸易伙伴将面临相同的10%对等关税；但在4月10日他签署的行政令中，将对中国的对等关税进一步提高至125%。加上早些时候对中国加征的关税，特朗普1月上任后对中国累计加征的关税已达到145%。
A week after U.S. President Donald Trump unveiled his globally alarming “reciprocal tariff” plan, on April 9, he announced a temporary halt to imposing differentiated high tariffs on one-third of U.S. trade partners. Over the next 90 days, trade partners excluding China will face a uniform reciprocal tariff rate of 10%. However, in an executive order signed on April 10, he further raised the reciprocal tariff on Chinese imports to 125%. Combined with earlier tariffs imposed on China, the total additional levies on Chinese goods since Trump took office in January have reached 145%.
对等关税的推出，被视为对全球贸易体系规则的颠覆。对于中国，接下来的应对之策如何选择尤为关键。
The introduction of reciprocal tariffs is seen as a disruption to the rules of the global trade system. For China, the choice of its next countermeasures will be particularly critical.
此次关税冲击对中国经济的影响有多大？在4月2日最初版本的对等关税推出后，市场机构大都认为将拉低2025年中国出口增速5—10个百分点，对国内生产总值（GDP）拖累的估算从0.5—2个百分点不等，总体来看，影响超过2018年那轮贸易战。
How significant is the impact of these tariffs on China’s economy? After the initial version of reciprocal tariffs was introduced on April 2, most market institutions estimated that it would reduce China's export growth rate by 5-10 percentage points by 2025. The projected drag on gross domestic product (GDP) ranged between 0.5 to 2 percentage points. Overall, the impact surpasses that of the trade war in 2018.
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- U.S. President Trump introduced reciprocal tariffs, imposing a 125% rate on Chinese imports, totaling 145% additional levies since his tenure. Analysts predict a 5-10% reduction in China's export growth by 2025, with a 0.5-2% GDP drag.
- China is countering economic pressures through domestic demand expansion, fiscal reforms, and public investments worth trillions of yuan, focusing on improving livelihoods and boosting consumption.
- China seeks to strengthen trade partnerships and potentially join the CPTPP to counteract U.S. protectionism while advocating global trade liberalization with allies like the EU and ASEAN.
[para. 1] On April 9, U.S. President Donald Trump introduced a temporary uniform reciprocal tariff of 10% for most trade partners, excluding China, while imposing a staggering 125% tariff on Chinese imports. With previous tariffs included, the total additional levies on Chinese goods since his presidency began reached 145%. These measures are significantly disrupting global trade rules, with China seeking critical counter-strategies. Market estimates suggest these tariffs could reduce China's export growth by 5–10 percentage points by 2025 and lower GDP growth by 0.5–2 percentage points, a greater impact than the 2018 trade war.
[para. 2] In response, China has unveiled measures to stabilize its asset markets, including actions by Central Huijin Investment Ltd. and support from the People's Bank of China. During an April 9 symposium, Premier Li Qiang emphasized the need for proactive economic policies to stabilize growth, expand domestic demand, and counter external uncertainties. The expansion of domestic consumption remains a strategic focus, supported by adjustments in fiscal measures such as reserve requirement ratio cuts, special-purpose bonds, and targeted spending.
[para. 3] Boosting domestic consumption, especially among low-income groups, presents a viable solution. Experts propose measures such as pension increases, public investment in livelihood services, and consumption-stimulating policies targeting rural populations and migrant workers. Significant public investment totaling over 31 trillion yuan is also suggested over the next five years to enhance urban living standards and address gaps in sectors like healthcare and infrastructure.
[para. 4] Externally, experts advocate for China to strengthen ties with other economies and expand global market access, countering U.S. protectionism. Potential strategies include deeper participation in regional trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and fostering relations with the European Union and ASEAN. Negotiations with the EU have already focused on promoting economic openness and cooperation in response to U.S. tariffs.
[para. 5] Addressing rising external pressure, experts highlight internal reforms like reducing tariffs, eliminating subsidies, and ensuring fair market access. Key measures include prohibiting tax incentives for specific businesses and enhancing guarantees for foreign enterprises in areas such as government procurement. These reforms aim to attract foreign businesses and improve domestic demand while navigating the challenges posed by U.S. tariffs. The government's overarching strategy combines fostering domestic consumption, increasing global integration, and undertaking structural reforms to solidify long-term economic resilience.
- Central Huijin Investment Ltd.
中央汇金公司 - Central Huijin Investment Ltd. is involved in stabilizing China's financial markets amid external challenges, as highlighted in the article. It has taken measures to stabilize the asset market, including stock buybacks by listed companies. The People's Bank of China has also pledged sufficient relending support to Central Huijin if needed, showcasing its role in ensuring market stability during economic uncertainties and addressing the impacts of U.S. tariffs.
- Nomura
野村 - The article mentions that Nomura China's Chief Economist, Lu Ting, has advocated enhancing social security systems and increasing basic public services for low-income groups, particularly migrant workers, to boost their consumption potential and support economic growth in response to external pressures like tariffs from the U.S. government.
- Morgan Stanley
摩根士丹利 - The article mentions Morgan Stanley China's Chief Economist, Xing Zhiqiang, who recommends implementing large-scale countermeasures to address tariff impacts. He suggests measures like significant fiscal stimulus and large-scale interest rate cuts to offset economic pressures caused by the U.S.'s increased tariffs.
- Ping An Securities
平安证券 - Ping An Securities' Chief Economist Zhong Zhengsheng suggests that China should focus on "doing its own thing" amid external challenges. He emphasizes stabilizing domestic demand, promoting internal consumption, and leveraging supply-side structural reforms to boost economic vitality.
- Zhongtai International
中泰国际 - Zhongtai International's chief economist, Li Xunlei, emphasized addressing export pressures by restructuring fiscal budgets, reallocating spending towards consumption, and reducing investment-focused expenditures. He suggested increasing the deficit, issuing long-term special bonds for unemployment benefits, food vouchers for low-income groups, and subsidies for recent graduates. This approach aims to alleviate employment and income issues caused by export challenges while mitigating overcapacity pressures.
- HSBC
汇丰银行 - HSBC's former Chief Economist for Greater China, Qu Hongbin, suggested using special treasury bonds to increase rural elderly pensions. This would ease the financial burden on younger generations, boost consumption potential, and establish a social security net for rural populations. He also advocated promoting urbanization for migrant workers, enhancing public service equality to unlock their consumption potential. These measures could create substantial short-term consumption growth and strengthen China's consumer market for long-term economic development.
- Yuekai Securities
粤开证券 - Yuekai Securities’ Chief Economist Luo Zhiheng suggested focusing fiscal spending on balancing investment and consumption. He emphasized directing investments toward regions with population inflow, addressing aging-related needs, and improving safety infrastructure. Luo advocated identifying truly necessary investment areas to enhance economic potential and respond to challenges effectively.
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