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Current U.S. Tariffs Have Limited Impact on China's Economy, but That Could Change

With the U.S. administration's tariffs underway, the likelihood of a global trade war is becoming increasingly foreseeable to many economists and trade industry experts. However, Moody's Investors Service reported on March 22 that the current measures will only have a limited impact on China's economy.

Unlike 10 years ago, Moody's reported, China is "less dependent on exports," which haven't shown much of a benefit to the country's gross domestic product (GDP) growth. The U.S. tariffs on solar panels, washing machines, steel and aluminum are unlikely to make a dent in the country's exports since there's minimal U.S. market exposure.

"However, the negative impact on both Chinese economic growth and specific industries would be greater … if the U.S. significantly expands tariffs and other significant and broad-ranging protectionist measures," the report stated. "Sectors with large direct exposure to the U.S. market include cork and wood products, furniture, office machines, household appliances, electrical equipment, road vehicles, telecommunications equipment, electrical machinery, apparel and footwear, animal oils and fats."

Although China is currently manufacturing parts in these sectors, Moody's added, additional U.S. trade policies could come down hard on domestic supply chains. According to Reuters, President Donald Trump is expected to announce tariffs on Chinese imports later today.

-Andrew Michaels, editorial associate

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Wednesday, 29 May 2024

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