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Trump’s prices strike the heart of Chinese manufacturing behemoth
President Donald Trump hit China with a second price in as many months, which means that imports from there are now faced with a tax of at least 20%.
This is his last salvo against Beijing, which is already facing steep American rates, 100% on electric manufacturing vehicles at 15% on clothing and shoes.
Trump’s prices strike at the heart of Chinese manufacturing behemoth – a network of factories, mounting channels and supply chains that make and ship almost everything, fast fashion and toys to solar panels and electric cars.
China’s trade surplus with the world has reached a record of 1 TN (788 billion pounds sterling) in 2024, on the back of strong exports (3.5 TN), which exceeded its import bill (2.5 billion dollars).
China has long been the world factory – it has prospered due to cheap labor and state investment in infrastructure since it opened its economy in global affairs in the late 1970s.
So, how much could Trump’s trade war harm the success of the manufacture of China?
What are the prices and how do they work?
Prices are taxes billed on goods imported from other countries.
Most prices are fixed as a percentage of the value of the goods, and it is generally the importer that pays them.
Thus, a tariff of 10% means that an imported product in the United States of China worth $ 4 would face an additional $ 0.40 load applied to it.
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Trump considers prices as a means of developing the American economy, protecting jobs and increasing tax revenue
The increase in the price of imported goods is supposed to encourage consumers to buy cheaper interior products instead, thus helping to stimulate the growth of their own economy.
Trump considers them as a way to develop the American economy, protect jobs and increase tax revenue. But economic studies of the impact of prices that Trump imposed during his first mandate suggest that the measures have finally increased prices for American consumers.
Trump said his most recent prices are aimed at putting pressure on China to stop more to stop the Fentanyl opioid flow in the United States.
He also imposed 25% prices on the American neighbors in Mexico and Canada, saying that his leaders were not doing enough to suppress illegal drug trade.
Can Trump’s prices harm Chinese factories?
Yes, say the analysts.
Exports were the “saving grace” of the Chinese economy and if taxes persist, exports to the United States could fall a quarter to a third, told BBC Harry Murphy, economist at Moody’s Analytics, BBC.
The pure value of China exports – which explain a fifth of the country’s revenues – means that a tariff of 20% could weaken foreign demand and reduce commercial surplus.
“Prices will harm China,” Alicia Garcia-Herrero told Natixis Alicia-Herrero, chief economist of Asia-Pacific in Natixis in Hong Kong. “They really need to do much more. They have to do what Xi Jinping has already said – stimulate domestic demand.”
It is a high task in an economy where the real estate market collapses and young disillusioned people find it difficult to find well -remunerated jobs.
The Chinese did not spend enough to recharge the economy – and Beijing has just announced a multitude of recovery measures to stimulate consumption.
Although prices can slow Chinese manufacturing, they cannot stop or replace it so easily, according to analysts.
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China had started to rotate clothing and shoes to make advanced technologies such as robotics and artificial intelligence (AI)
“Not only is China the big exporter, but it is sometimes the only exporter as for solar panels. If you want solar panels, you can only go to China,” said Garcia-Herrero.
China had started to pass clothes and shoes to advanced technologies such as robotics and artificial intelligence (AI) long before Trump became president. And that gave China an advantage of “early mover”, not to mention the extent of production in the second world economy.
Chinese factories can produce high -end technologies in large quantities at low cost, said Shuang Ding, Chinese chief economist at Standard Chartered.
“It is really difficult to find a replacement … China’s status as a market leader is very difficult to overthrow.”
How does China react to Trump’s prices?
China has responded with counter-triggers of 10 to 15% on American agricultural products, coal, liquefied natural gas, vans and certain sports cars.
And he targeted American companies in aviation, defense and technology with export restrictions and announced an anti-monopoly survey against Google.
China has also spent years adapting to the prices of Trump’s first mandate. Some Chinese manufacturers have moved factories outside the country, for example. And the supply chains have reached more on Vietnam and Mexico by exporting from there to bypass the prices.
And yet, Trump’s recent prices on Mexico would not hurt China too much because Vietnam is a bigger stolen door for Chinese products, said Garcia-Herrero.
“Vietnam is the key here. If prices are imposed in Vietnam, I think it will be very difficult,” he said.
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Deepseek shocked the Silicon Valley and annoyed Washington when he published a chatbot that rivals the OpenAi Chatppt
What is more concerned with China than prices, analysts, these are the American restrictions on advanced fleas.
These restrictions were a major collision point between the two countries, but they also fueled the determination of China to invest in local technology independent of the West.
This is why the Chinese Society of IA Deepseek shocked the Silicon Valley and upset Washington when he published a chatbot that rivals the Openai chatpt. The company would have stored NVIDIA fleas before the United States started to cut China access to the most advanced.
Although it can “have an impact on the competitiveness of China, I do not think that would affect China’s status as a manufacturing power,” said Ding de Standard Charterd.
On the other hand, all terrain that China is gaining in the manufacture of advanced technologies will increase its high value exports.
How has China become a manufacturing superpower?
This happened due to state support, an unrivaled supply chain and cheap workforce, according to analysts.
“The combination of globalization, as well as Chinese pro-enterprise policies and market potential, have helped attract the initial wave of foreign investors,” said Chim Lee, an analyst at the Economy Intelligence Unit, to the BBC.
The government then doubled, investing massively in the construction of a sprawling network of roads and ports to provide raw materials and take Chinese manufacturing goods to the world. What also helped was a stable exchange rate between the Chinese yuan and the US dollar.
A change in recent years to Advanced Tech has made sure that it will continue to be relevant and ahead of its competitors, according to analysts.
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It is very difficult to replace China as the world factory, analysts say
China already has a lot of economic influence of being a manufacturing power. But there is also a political opportunity because Trump’s prices have overturned the American relationship with the world.
“The door is ajar for China to position itself as a defender of free trade and a stable world force,” said Cruise de Moody’s.
But it is not easy, since Beijing was accused of having flouted international trade standards, as imposing a rate of more than 200% on imports of Australian wine in 2020.
Analysts say that China must also look beyond the United States, which is still the main destination of its exports. China is the third American export market after Canada and Mexico.
Chinese trade with Europe, Southeast Asia and Latin America have increased, but it is difficult to imagine that the two largest economies in the world can stop counting on each other.
