The current US tariff rate will drag China’s GDP growth lower by c.1.8ppt. Any further increases in tariffs are likely to have little impact on China’s growth. Another CNY 1.5-2.0tn of fiscal support is needed, supported by moderately loose monetary policy, Standard Chartered's economists report.
The perfect storm
"Over the past week, the US and China have announced sweeping tariffs in multiple rounds of retaliation. As of now, China’s tariff on US products has jumped to 142%, and the US’ tariff on China has surged to 157%, according to our estimate. As bilateral tariffs are already punitively high, any further increase in tariffs is likely to have a diminishing impact on China’s growth."
"We estimate that the current tariff rate will lower China’s GDP growth by about 1.8ppt. While there are further risks to our estimate from a potential global recession and repercussions on domestic employment, consumption and investment, we also see mitigating factors. The US’ 90-day delay in non-China reciprocal tariffs should help keep goods with China-produced content flowing to the US. Further, a moderate depreciation in the CNY could act as a shock absorber. More importantly, China can continue to explore new export destinations while reducing its reliance on overall imports, which should help offset the US tariff impact on its net exports."
"China and the US appear to be locked in a high-stakes game, with the near-term prospect of either side backing down before economic pain is inflicted looking dim. We see downside risks to China’s growth but believe that the government will roll out more stimulus to prevent growth from significantly undershooting its 5% growth target. A further CNY 1.5-2.0tn (1.0-1.5% of GDP) of fiscal stimulus is needed, in our view. The Politburo meetings in late April and July will be key events to watch."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to gains above 1.1350 after mixed US data
EUR/USD stays in positive territory above 1.1350 in the American session on Thursday. The US Dollar (USD) struggles to gather strength following the mixed macroeconomic data releases from the US, allowing the pair to cling to its daily gains.
GBP/USD holds steady near 1.3300 on renewed USD weakness
GBP/USD stabilizes at around 1.3300 in the second half of the day on Thursday as the USD finds it difficult to build on this week's gains. The uncertainty surrounding the US-China trade relations moving forward and mixed data releases from the US help the pair hold its ground.
Gold rebounds after sharp decline, holds comfortably above $3,300
After posting large losses on Tuesday and Wednesday, Gold gathered recovery momentum and advanced toward $3,350 on Thursday. Markets remain wary of a re-escalation of the US-China trade conflict, helping XAU/USD find demand as a safe haven.
Bitcoin Price corrects as increased profit-taking offsets positive market sentiment
Bitcoin (BTC) is facing a slight correction, trading around $92,000 at the time of writing on Thursday after rallying 8.55% so far this week. Institutional demand remained strong as US spot Exchange Traded Funds (ETFs) recorded an inflow of $916.91 million on Wednesday.
Five fundamentals for the week: Traders confront the trade war, important surveys, key Fed speech Premium
Will the US strike a trade deal with Japan? That would be positive progress. However, recent developments are not that positive, and there's only one certainty: headlines will dominate markets. Fresh US economic data is also of interest.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.