The potential return of Donald Trump to the White House is raising concerns about the future of U.S.-China trade relations. According to a report from Barclays, a renewed Trump administration could escalate tensions into a full-blown trade conflict, potentially prompting China to initiate a significant economic stimulus package to counter the fallout.
Trump’s previous trade policies, marked by tariff hikes, could pressure China to prioritize domestic demand. In contrast, Vice President Kamala Harris’ approach focuses on tech restrictions rather than new tariffs, suggesting a different trajectory for trade relations.
Chinese officials are reportedly preparing for a potential economic downturn triggered by Trump’s return. A substantial economic stimulus package is anticipated to be unveiled during the current National People’s Congress (NPC) Standing Committee session, concluding on November 8th. This measure could be the first in a series of initiatives designed to bolster China’s economic resilience.
The report highlights potential adjustments in China’s economic goals to address these pressures. Notably, U.S.-listed Chinese stocks, including Alibaba Group Holding (BABA), JD.com (JD), Baidu (BIDU), NIO, Li Auto (LI), and XPeng (XPEV), have seen declines in trading following Trump’s victory.
Despite the looming trade uncertainties, China’s economy displayed positive signs in October, with improvements in both manufacturing and services. Stimulus measures seem to be taking effect, as evidenced by the official purchasing managers’ index (PMI) rising to 50.1 in October, marking the end of a five-month contraction.
China’s non-manufacturing PMI, which tracks services and construction, also climbed to 50.2 in October, largely driven by increased service sector activity related to travel during the National Day holiday. The Caixin composite PMI, reflecting both manufacturing and services, reported growth, reaching 51.9, further indicating a gradual recovery in China’s economic momentum.
While the October PMI increases suggest a recovery, experts remain cautious about the long-term stability of China’s economy, acknowledging the potential impact of heightened trade tensions. The potential for increased tariffs and a trade war could significantly impact China’s economic growth trajectory.
