China faces challenges from 'Trump 2.0 trade war'

US President-elect Donald Trump yesterday (December 1, Vietnam time) asked BRICS countries to commit not to create a new currency or support another currency to replace the USD. Otherwise, BRICS will face a 100% tax when exporting goods to the US.

BRICS is an acronym for the first five members of the bloc: Brazil, Russia, India, China, South Africa. But this bloc now has additional members: Egypt, Ethiopia, Iran and UAE.

Pressure from many sides

In fact, during his campaign, Mr. Trump threatened to impose a 60% tax on Chinese goods. He then built a team of foreign policy and trade finance officials who tend to play hardball. Recently, Mr. Trump announced that he would initially "launch" the tax on Chinese goods at 10% and be ready to increase it.

China's real estate market remains stagnant

Meanwhile, China's economy is facing many outstanding challenges and efforts to resolve them have not been effective. First of all, the real estate market. Nikkei Asia on November 29 cited data released by the Chinese Ministry of Finance, saying that the land use fees collected by the country from January to October were 2,700 billion yuan (about 372 billion USD), down 23% compared to the same period last year and marking the third consecutive year of decline. This is one of the main sources of revenue for the budget in many localities in China. Demand for land has fallen sharply as the real estate recession has dragged on, so real estate developers have limited the opening of new projects. According to China's statistics agency, home sales by floor area from January to October fell 18% compared to the same period in 2023. This shows that the real estate market rescue measures introduced by the government a few months ago have not yet shown breakthrough results.

According to the announcement last week, the manufacturing Purchasing Managers’ Index (PMI) in November reached 50.3 points, higher than the 50.1 points in October. This result reflects that some economic stimulus measures have taken effect. However, according to analysts, this is only a short-term improvement and the coming time may face more difficulties. Not only that, the non-manufacturing PMI (including trade and service sectors) decreased from 50.2 points in October to 50 points in November.

Therefore, analysts say China still needs to further strengthen economic stimulus measures to hope to resolve the current stagnation.

Difficult outlook

In an analysis sent to Thanh Nien , credit rating agency S&P Ratings made comments on China's economic situation in the coming time if the US applies trade sanctions, such as increasing taxes.

Accordingly, the Chinese economy will be affected by the US's increase in trade tariffs on its exports. Because both export growth and investment will decline. Investment will be affected even if the US has not officially increased tariffs on Chinese goods, because investors are concerned about the risks. These have a major impact on employment, income and people's confidence, leading to spending restrictions that affect consumption in the domestic Chinese market.

As a result, S&P Ratings forecasts China's GDP growth to reach 4.8% in 2024, then decline to 4.1% in 2025 and 3.8% in 2026, respectively. The growth forecasts for 2025 and 2026 are 0.2 percentage points and 0.7 percentage points lower than S&P Ratings' forecasts in September. Moreover, if the US indeed imposes a 60% tariff, China's economic growth could fall below 2% in 2026.

China prepares "toys" to deal with the US

Asia Times reported on December 1 that China has just approved a list of 700 restricted export items. Among them are many items that the US needs to develop important products, especially in technology. Typically, this list includes rare earths and some basic technology components that the US has long relied on for supply from China. The above list of restricted exports takes effect from December 1. However, Beijing has not provided details about the restrictions.

In August 2023, China imposed export restrictions on gallium and germanium, which are used in compound semiconductors, often used to improve transmission speeds and increase the efficiency of radar.

Source: https://thanhnien.vn/trung-quoc-giua-thach-thuc-thuong-chien-trump-20-185241201194605711.htm