President-elect Donald Trump’s threat to impose 60% tariffs on all Chinese imports threatens to further damage China’s already struggling economy. Goldman Sachs predicts that President Trump’s proposed 60% tariffs on all Chinese imports would reduce China’s GDP by 2 percentage points. Swiss bank UBS China’s GDP growth rate forecast for 2025 revised downward The tax rate was lowered from 4.5% to around 4% due to the possibility of additional tariffs by the United States.
But despite the economic damage these tariffs could cause, Fred Hu, founder of Chinese investment firm Primavera Capital Group, has urged Beijing to retaliate against President Trump’s trade policies. He advised them to exercise restraint.
“If China chooses to retaliate and start a trade war, it will have global repercussions and it will be high stakes,” Hu said Monday at the Fortune Global Forum in New York. said. “I would like to urge Chinese people to remain calm and not retaliate.”
China has previously retaliated against recent trade actions by the United States and its allies. The Chinese government recently launched anti-dumping investigations into European pork products, dairy products and brandy in response to the threat of EU tariffs on Chinese-made EVs.
“Tariffs generally do more harm than good,” Hu said, citing the Smoot-Hawley Tariff Act of 1930, which imposed broad tariffs on U.S. imports. Economists blame the law for worsening the effects of the Great Depression.
In addition to the 60% tariffs on China, President Trump also promised broad-based tariffs of up to 20% on all U.S. imports.
Will China pass further stimulus?
President Trump’s tariff threats add to pressure on Chinese officials, already facing a housing recession and weak domestic consumption. Economists expect China to struggle to meet its 5% growth target in 2024.
Since September, Chinese authorities have launched a series of measures to support the economy, including supporting the domestic stock market, lowering interest rates and local government debt swaps. But investors are underwhelmed by the Chinese government’s promises, especially the lack of direct support to consumers.
However, Zhongyuan Zoe Liu, a China scholar at the Council on Foreign Relations, said the Chinese government has little experience with consumer stimulus measures. China’s manufacturing-focused economic plans lacked “focus or special consideration for the consumer market,” he explained.
Encouraging consumption would be “asking the system to do exactly the opposite of what it is supposed to do.”
Liu also highlighted tensions in China’s “campaign growth,” where local authorities invest in strategically important industries to foster growth. Such investments often lead to “overshoot,” she says.
“Ultimately, you will face intense market competition,” she continued. “Profit margins are so thin that companies have an incentive to expand overseas, regardless of Chinese government support.”
President Trump’s tariffs are likely to push Chinese companies away from their traditional trading partner, the United States, and toward markets such as Europe, Latin America and Southeast Asia.
If President Trump has his way, Liu predicts that trade between China and the United States “will continue to stagnate, if not decline.”
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