Can China withstand a 125% US tariff?published at 03:22 British Summer Time 10 April
Annabelle Liang
Business reporter, Singapore
It’s getting increasingly difficult to believe that just over a week ago, US tariffs on China stood at 20%.
The levies have since ballooned to 104% and now 125% with Trump’s latest tariffs salvo.
While the numbers are astonishing, analysts say they are way past the threshold for Chinese businesses trying to make profits by exporting goods to America.
“At these levels, the damage from added tariffs is likely to be greatly diminished,” says Louise Loo from the Oxford Economics consultancy.
Firms may be forced to sell to goods to Chinese consumers instead “as other countries are already taking steps to fend off the prospect of a flood of Chinese exports landing on their shores,” says Eswar Prasad, a professor specialising in trade policy at Cornell University.
With exports being so important to China’s economy, it will be up to policymakers to stimulate consumption, he adds.
This could be an uphill task as China’s economy has slipped into deflation, with the official measure of consumer prices falling for a second month straight in March.
There is also the possibility that China could devalue its currency further. A weaker yuan makes Chinese exports cheaper to buy with foreign currencies.
The yuan fell to a 19-month low against the dollar on Thursday.
“It would have wider ramifications on sentiment and capital flows so [China doesn’t] seem keen to use it,” says Priyanka Kishore from the Asia Decoded research firm. “But exceptional times can call for exceptional measures.”
Image source, Getty ImagesMany Chinese firms currently sell goods to the US
