Trump presidency would spell trouble for China’s economy, says Daiwa economist

With the US presidential election less than two months away, a Daiwa economist has warned that a Donald Trump presidency could spell big trouble for China’s economy.

Backed by a popular American view that the US has not received a fair deal since China joined the World Trade Organisation in 2001, Trump advocates a four-point plan to reform US-China trade

policy.

Top of the Trump agendahas been a threat to name China a currency manipulator. The candidate has also said he would force China to uphold intellectual property laws, end China’s export subsidies, and cut domestic US corporate tax, the latter move helping to keep US jobs at home.

As part of his negotiating tactics to force China to acquiesce, Trump has advocated imposing a 45 per cent tariff on Chinese imports to the US.

Daiwa’s Asia chief economist Kevin Lai said such a tariff policy, if it became reality, could mean as much as a 4.8 percentage point reduction in China’s gross domestic product at a time when he sees the country delivering only 6.5 per cent growth this year, slowing to 6 per cent next year. And Beijing would be in no position to retaliate.

“[China] would have to find somewhere else to sell its products. This would exacerbate the overcapacity issues in the economy, putting greater deflation pressure on China, while shrinking China’s capital account surplus position,” Lai said.