Trump’s tariff exemption to trim GDP impact on China, Citi says
Economists at Goldman Sachs have also trimmed projections for the country’s GDP growth
[NEW YORK] US President Donald Trump’s latest tariff exemptions on consumer electronics and semiconductors could reduce the negative impact on China’s economy by 0.4 percentage point, if it were to last, according to Citigroup.
The reprieve announced on Friday (Apr 11) covered US$100 billion of goods – more than a fifth of total US imports from China last year – the bank’s economists including Xiangrong Yu wrote in a note. That could effectively bring US tariff rates on Beijing down by 28.5 percentage points to about 127.5 per cent, they said.
“We reckon the tariff dispute could have peaked between the US and China,” they wrote. “Meaningful de-escalation is not in sight yet in our view.”
The bank previously downgraded its forecast for China’s growth this year to 4.2 per cent – from 4.7 per cent last week. Exemptions in labour-intensive sectors could help protect growth, with some nine million urban Chinese jobs linked to exports to the US, according to Citi.
Trump downplayed his weekend exemptions on Sunday, pledging to still apply tariffs to phones, computers and popular consumer electronics. “NOBODY is getting ‘off the hook’,” Trump said in a social media post.
Newly-added US tariffs on Chinese goods this year hit 145 per cent before the Sunday pause on electronics and chip products, well above the levels analysts have said would decimate bilateral trade. Economists at Goldman Sachs have also trimmed projections for China’s GDP growth, as prospects for a deal dimmed after President Xi Jinping retaliated to Trump’s reciprocal tariffs in kind.
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The exemptions suggest Beijing’s tit-for-tat strategy is “beginning to yield results”, according to Tommy Xie, head of Asia macro research at OCBC, who noted China’s initial measured and restrained approach was met with “little acknowledgment” from the US.
The pause could shield around 20 per cent of Chinese goods to the US from the 125 per cent reciprocal tariffs, although they may still face the separate 20 per cent fentanyl-related levies, he wrote in a note.
China’s Ministry of Commerce welcomed the tariff exclusion on Sunday, calling it a “small step by the US towards correcting its wrongful action”, while urging Washington to “take a big stride” towards abolishing the reciprocal levies.
The Citi economists expect more US tariff rollbacks could emerge due to supply chain disruption, inflationary pressure, American business interests, and Treasury Secretary Scott Bessent potentially leading trade negotiations.
However, they also warned risks remain for China-US tension to spill into other areas such as services trade and finance, with China’s Treasury holdings already capturing market attention. BLOOMBERG
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