Trump and Asia: what will be the relationship with the inconvenient Chinese giant
By virtue of the economic and political weight of the contenders, the entire Indo-Pacific will be confronted with choices that could upset the economic and strategic balance of some of the world's main growth engines
3' min read
3' min read
From our correspondent
NEW DELHI - The political earthquake that brought Donald Trump back to the White House is set to generate massive waves. And - if the election promises are fulfilled - the swells that will cross the Pacific Ocean could turn into a tsunami hurled at great speed towards the coasts of Asia. First and foremost, China will have to deal with it. But, by virtue of the economic and political weight of the contenders, it will be the whole Indo-Pacific that will have to contend with choices that could upset the economic and strategic balance of some of the main engines of world growth.
The Chinese Target
.The starting point is inevitably the tariffs. In the election campaign, Trump promised 60% tariffs on Chinese consumer goods. If he kept his word, Beijing - with its $500 billion of exports to the US, 15% of the total - would face a challenge to say the least. To understand how much, one only has to make a comparison with what happened in 2018-19, when the Republican leader's protectionist agenda took the form of duties ranging from 7.5% to 25% on $370 billion of made-in-China goods. This time, in addition to more than double the tariffs, it would be the condition of the Chinese economy, which is no longer what it was in 2018, that would make the difference.
At the time, a quarter of Beijing's GDP revolved around the real estate sector. Today, real estate is in deep trouble and will not be able to help China absorb the impact of a new trade war. Not only that. The real estate crisis has burdened local governments with debts that will greatly reduce the fiscal arsenal deployable to cushion external shocks. A picture made even more uncertain by other factors: a domestic demand that remains weak, with household consumption lower than 40% of GDP, about 20 points lower than the world average; deflationary pressures that would be aggravated by a contraction in foreign demand; limited margins of manoeuvre to depreciate the yuan by the 18% that, according to some estimates, would make it possible to offset a 60% duty on the United States.
The possible answers
."China," explains Alicia Garcia Herrero, Asia Pacific chief economist at Natixis, "cannot in fact respond" to tariffs of this magnitude. 'What it can do,' she continues, 'is to announce new stimuli to the economy so that the markets do not penalise it'. But also to try to counterattack. For example, by imposing duties on the agri-food sector (thanks to its strong trade relations with Brazil), penalising American companies with strong Chinese interests, and introducing limits on the export of crucial raw materials. This already happened last year with gallium and germanium, two metals used in the defence, communications and semiconductor sectors.
