How much will China suffer from a trade war?
A country that founded its economic transformation on making goods the world bought would seem vulnerable to punitive tariffs because they’ll make those exports more expensive.
But Chinese officials insist they’re not worried. And that confidence has a lot to do with hot rods and iPhones.
CGTN’s Owen Fairclough has more.
Chinese consumers lining up for the latest iPhone – while top of the range sports cars are increasingly common on the streets of big Chinese cities.
This kind of consumption is relatively new, and it’s changing the balance of China’s economy.
“I estimate that because of the developments in this year’s various innovative industries and the current service industry,” He Lifeng, chairman of China’s National Development and Reform Commission said. “Consumers might contribute close to or surpass 60 percent of our economic growth.”
Chinese consumer confidence is the highest it’s ever been. Both foreign and domestic car manufacturers are reporting higher sales, though growth is slowing. And disposable income is rising faster than economic output .
Even so, China remains the world’s factory for western consumers. The tariffs will make targeted products more expensive to export.
But, while exports still outweigh imports, growth is slowing down. In January 2010, Chinese government figures show they were growing by more than 20 percent. In the same month last year, they grew by just under 8 percent.
If Chinese exporters suffer in a trade war, so will U.S consumers.
“You can’t gain from imposing tariffs. That’s almost impossible,” Nicholas Lardy, Senior Fellow, Peterson Institute for International Economics said. “Consumers will pay a lot more. And, take some of the products for example, if you look at consumer electronics, the products that are coming from China, in many cases, have not been produced in the United States for many years, and the production of those products is not going to come back to the United States in response to a tariff.”
A reminder that even if China didn’t respond with retaliatory tariffs, both sides stand to lose.