China export ‘rush’ expected ahead of Trump’s trade war 2.0, Beijing to show restraint

With Donald Trump’s election victory sparking expectations of steep tariffs, US importers are expected to rush to front-load goods from China even before January’s inauguration to sidestep potential cost increases and deliver a surprising boost to Chinese exports.

In the long term, analysts said the direct damage to China’s economy caused by any potential tariff increases would be modest, although cumulative tariffs could hit exports, and may require a higher fiscal deficit or yuan depreciation to counterbalance pressures.

Economists at London-based Capital Economics estimated last week that the direct damage of large US tariffs on China’s economy would probably be less than 0.5 per cent of gross domestic product, as exporters can bypass tariffs via other countries and also receive support from depreciation of the yuan.

And while an increase in the effective tariff rate from 15 per cent to 60 per cent would lower China’s GDP by 1.1 per cent, a partial exchange rate adjustment could reduce the damage to 0.7 per cent of GDP, they said.

Zhong Zhengsheng, chief economist at Ping An Securities, on Sunday said it was quite certain that there would be a rush of exports in China’s foreign trade in the next quarter.

“This has been reflected in freight rates,” he added, noting that China’s export container freight index stabilised and rebounded at the start of November, with the US West Coast and US East Coast routes recording a rebound,” Zhong said.