Incoming President Donald Trump’s threat to impose 60% tariffs on all Chinese imports threatens more pain on an China’s already struggling economy. Goldman Sachs predicts that Trump’s proposed 60% tariffs on all Chinese imports will knock two percentage points off of China’s GDP. Swiss bank UBS cut its 2025 China GDP growth forecast to around 4%, down from 4.5%, citing the possibility of U.S. tariffs.
Yet despite the economic damage that these tariffs might cause, Fred Hu, founder of Chinese investment firm Primavera Capital Group, advised Beijing to hold back on retaliating to Trump’s trade policy.
“If China chooses to retaliate and start a trade war, that’s a lose-lose with global ramifications,” Hu said Monday at the Fortune Global Forum in New York. “I would urge the Chinese to stay cool. You should not retaliate.”
China has previously retaliated against recent trade measures by the U.S. and its allies. Beijing recently launched anti-dumping probes on European pork products, dairy, and brandy in response to the threat of European Union tariffs on China-made EVs.
“Generally, tariffs have done more harm than good,” Hu said, citing the Smoot–Hawley Tariff Act, which imposed broad duties on U.S. imports in 1930. Economists blame the Act for worsening the effects of the Great Depression.
In addition to 60% tariffs on China, Trump has also promised broad tariffs of up to 20% on all U.S. imports.
Will China pass more stimulus?
Trump’s tariff threat adds more pressure on Chinese officials already grappling with a housing slump and weak domestic consumption. Economists predict that China will struggle to meet its 2024 growth target of 5%.
Since September, Chinese officials have rolled out a series of measures to bolster the economy, including support for the country’s stock markets, rate cuts and local government debt swaps. Yet investors are underwhelmed by Beijing’s promises, particularly the lack of direct support to consumers.
Yet Zongyuan Zoe Liu, a China scholar at the Council on Foreign Relations, noted that Beijing has little experience with consumer stimulus. China’s manufacturing-focused economic plans lacked “an emphasis or specific attention to the consumer market,” she explained.
Encouraging consumption would be “asking the system to do exactly the opposite of what it’s supposed to do.”
Liu also highlighted the tension in China’s “campaign-style growth,” where local officials invest in strategically important industries to spur growth. Such investment often leads to “overshooting,” she said.
“You end up having this fierce market competition,” she continued. “Profit margins are so thin that companies have an incentive, regardless of Beijing’s support, to go abroad.”
Trump’s tariffs are likely to orient Chinese companies towards markets like Europe, Latin America and Southeast Asia, and away from its traditional trading partner, the U.S.
Liu predicts that if Trump gets his way, China’s trade with the U.S. “is going to continue to–if not decline–then stagnate.”
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