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It is likely that Imminent US tariffs. UU. Indicate a significant blow to the economy that was already missing in China, reinforcing the calls to more forceful stimulus measures to reinforce the growth of the country.
The president of the United States, Donald Trump, followed on Saturday a threat made after his presidential victory, imposing 10% tariff The United States.
10% blanket rates will be collected on top of existing rates up to 25% That Trump had imposed on Chinese products during his first presidency.
Additional 10% tariffs would reduce the real growth of China’s GDP by 50 basic points this year, Goldman Sachs economists said in a report on Monday.
The investment bank expects real GDP growth of China to decrease to 4.5% this year, while the growth of national prices remains under pressure due to weak demand, and consumer inflation is expected to increase only 0, 4% in 2025. Consumer price inflation barely grew last year, 0.2% year after year. The highest rates of the USA could further force internal prices as the external demand of Chinese products weakens.
When Trump began his second term, he ordered his administration to investigate Beijing compliance with a commercial agreement arriving during his first presidency in 2020. The final result of the evaluation will be delivered to Trump before April 1, which could prepare the Scenario for new tariff actions, economists said.
“Clearly, the 10% rate increase entered quickly and lower, but there is still a lot of uncertainty about the moment and the scale of additional tariffs on China,” Wang Tao, Chinese chief economist from UBS Bank to CNBC, said on Monday.
“We are not reviewing our 2025 reference prognosis of 4.0% GDP growth for China,” he said, Factorization in additional tariffs of the United States 60% in a quarter of China’s exports and greater political support from Beijing .
Monetary defense
The Chinese yuan fell 0.60% to 7,3631 against the Back Green in offshore trade on Monday, before cutting losses, according to LSE data. Yuan on the high seas has lost 3.7% since Trump’s presidential victory in early November.
The markets in Continental China were closed for the New Year lunar and will resume negotiation on Wednesday.
A main tool used by the Popular Bank of China to manage the currency has been the daily reference rate: Yuan on land can operate only within a range of 2% of this reference rate.
The point at which PBOC establishes the reference rate on Wednesday will be a key indicator to measure Beijing’s reaction to tariff wires, said Ding Shuang, chief economist of the Gran China and northern Asia at Standard Chartered Bank.
“We hope that China mainly trust the stimulus to boost domestic demand, instead of a great devaluation, to compensate for the tariff impact,” Shuang added.
Since last year, the Central Bank has been limiting the exchange rate guide in less than 7.20 per dollar, a movement seen as a sign of its determination to defend the currency.
As the rate rates rises, the Central Bank could allow a “highest gradual drift” in the yuan on land between 7.40 and 7.50 against the US dollar, said Goldman Sachs, hoping that the PBOC prioritizes the stability of FX before the Ease of monetary policy.
The Central Bank could “omit” other flexion measures such as reducing the amount of cash that banks must have as reserves, while it comes to managing liquidity through the inverse repurchase operations of the open market, according to Goldman Sachs.
Stimulus with eyes
China could “effectively ignore” strong tariffs during Trump’s first mandate, but “it is not so easy to escape the impact of tariffs this time,” Barclays said in a note on Monday.
Policy rooms to maneuver depreciation of the exchange rate, large -scale diversion and reduction in exporting gains margins have “significantly decreased,” said the bank.
As an external commercial war progresses, economists expect more fiscal expense to compensate for China’s deflationary pressures and increase consumers.
While the economy reached the growth objective of 5.0% last year, it fought to emerge from a real estate collapse and a weak consumer confidence and business, leaving exports as a key promotion of growth. Even in 2023, Exports contributed almost 20% of the country’s GDPAccording to World Bank data.
Teta pending
China Ministry of Commerce Said Sunday that it would challenge Trump’s tariff decision In the World Trade Organization, condemning radical tariffs as a “serious violation of international trade rules.”
While promising to “take the corresponding countermeasures to firmly safeguard their own rights and interests,” the Declaration of China, however, arrested specific plans for rates.
The presentation of a lawsuit before the WTO has been largely a symbolic movement that Beijing has also taken against tariffs to electric vehicles made by Chinese by the European Union. In recent weeks, Chinese officials have reiterated that Beijing believes There is no winner in a commercial war.
Beijing’s response has so far appeared “Mild to start,” said Lynn Song, LNG chief economist, but warned that some Chinese political leaders may still be on vacation, so he delayed the announcement of any concrete reprisal until they return to I work on February 5.
“If they push a corner, China’s retaliation could be stronger than most expect,” Song added, suggesting that Beijing has a variety of tools to respond, including the intensification of export controls or prohibitions in prohibitions in Rare earths, and measures aimed at American conglomerates with great dependence on the Chinese market.
Trump’s executive orders included additional 25% tariffs on the goods of Mexico, one of the main channels for writing China’s exports.
That can lead China to change exports to ASEAN countries and Latin Americans, while increasing commercial ties with these nations to help compensate for “a more protectionist,” Song added.
