China’s Growth May Hit a Wall with Trump’s Tariff Threat

China Economic Growth: India's foreign investment outlook might witness another setback as reports indicate that China's economy likely picked up steam just last month. This is primarily owing to the government's stimulus measures launched in late September.

As per a Bloomberg survey of economists, October's industrial output and retail sales grew faster last month as compared to that of September. Plus, the government's housing market likely gave a push to home sales. Even the retail sales witnessed a boost owing to an extended holiday in early October.

It is worth noting that the dragon economy had announced another stimulus package of 10 trillion yuan or $1.4 trillion just last week. This was largely aimed at solving the local government debt issue and providing much-needed economic support. However, many analysts and economists viewed it as an effort to trickle down the "hidden debt" of the economy rather than any 'stimulus.'

According to estimates by Lan Fo’an, Finance Minister of China, the "hidden debt" could fall from 14.3 trillion yuan at the end 2023 (recorded at the end of 2023) to 2.3 trillion yuan by 2028. He also mentioned that these new measures would ease the financial strain on local authorities, and thus allow more funds to be directed toward stimulating economic growth.

The Trump Effect

While hope remains intact for the dragon economy, the recent win of Donald Trump in the US Presidential election might act as a dampener.

While the official economic data is expected on Friday, any signs of improvement would add to the growing evidence of a turnaround in China’s growth trajectory, as per a report by Bloomberg.

However, Trump's return could threaten this recovery as the Republican president has been quite vocal about heavy import tariffs.

For other nations, the tariff increase might be limited to just 10-20 per cent. But for China, these tariff levels can go as high as 60 per cent. This might adversely impact the recovery outlook of the country as massive trade wars with the Western superpower often don't bode well for nations witnessing economic crisis.