Despite campaigning on a vow to impose 60 per cent tariffs on all Chinese imports, US president-elect Donald Trump will probably seek an average of 20 per cent tariffs on most of those, the chief economist of Goldman Sachs said on Thursday.
Speaking at the Atlantic Council in Washington, Jan Hatzius of the investment banking giant added that levies might rise to 60 per cent on a limited number of key capital goods, like solar panels, steel and aluminium.
Hatzius noted that China would have a wide range of responses available, should the world’s two largest economies intensify their trade war during Trump’s second administration.
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Trump, who is to take office on January 20, had also threatened tariffs of 100 to 200 per cent on Chinese-made electric vehicles, a measure he said could return jobs and manufacturing back to America.
But Hatzius predicted “a modestly benign outcome, with increases in US tariff rates on China averaging about 20 percentage points – as much as 60 percentage points in some areas, but not 60 percentage points across the board”.
“That would be a very inflationary outcome,” Hatzius said.
Consumer products made in China like iPhones and other electronics are likely to be hit with lower tariffs, while capital and intermediary goods covered in Sections 201 and 232 – tariff lists Trump used in his first term – including items like solar panels, steel and aluminium, may rise to 60 per cent.
Trump imposed tariffs on more than $300 billion worth of Chinese goods in his first term. US President Joe Biden added more tariffs on imports worth US$18 billion; those products included EVs, which now already face 100 per cent tariffs. Solar panels from China now face 50 per cent tariffs, while steel and aluminium products face 25 per cent levies.
China, Hatzius said, is prepared for a renewed trade war, and has many tools with which to respond. Likely measures, he said, included export controls, leveraging its bond portfolio, or “making life more difficult for US companies” operating in China.
Last month, for the first time, China explicitly targeted the US with a ban of critical mineral exports that are crucial to the manufacture of semiconductors, including gallium, germanium and antimony.
Beijing took the action to retaliate for Washington’s restrictions on exports to China of chipmaking equipment and high-bandwidth memory chips.
Indeed, in the last two months of Biden’s term, his administration has announced several new trade and tech restrictions targeting China’s hi-tech sector, moves that Trump is expected to continue.
China is also the second-largest holder of US bonds behind Japan, and has been steadily selling off some of its US$760 billion in holdings to reduce dependence on US dollars.
In December, Goldman Sachs forecast China’s GDP growth at 4.5 per cent in 2025, down from 4.9 per cent in 2024.
Hatzius said that, should Trump impose them, the 20 per cent tariffs would drag down China’s GDP by an estimated 70 basis points, or 0.7 per cent.
In a New Year address, Chinese President Xi Jinping said that the country was expected to reach its GDP target of 5 per cent this year.
China is facing an economic slowdown prompted by weak consumer demand and a sagging housing market, as well as long-term structural issues of population decline. In the past few months, authorities have been rolling out the largest agenda of stimulus measures since the Covid-19 pandemic to revive the economy.
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