Link to article: https://apnews.com/article/china-congress-economy-private-jinping-tariffs-aac0a8931a14c0d2f17087351914a068
This month, China held their annual National People’s Congress. The meeting primarily focused on how to improve their slowing economy, especially in the wake of the trade war between the U.S. and China. They’ve set the goal of around 5% growth in the economy – the same goal they had in 2024. To achieve this goal, the Chinese government is looking to pursue policy that will increase investment and consumer spending. One of these policies has the government pay consumers to buy new cars and appliances – essentially subsidizing consumer spending. Based on the ambitious growth target, further economic stimulus is expected, though what form that may take is currently unknown.
Since Covid-19, China – unlike many other countries – has actually been experiencing deflation of their currency, leading to their emphasis on consumer spending and addressing the real estate slump. In part due to the influence of communism, consumer demand has historically never really been emphasized. And now, China has to contend with further tariffs on their goods from the U.S. – which may put further strain on their economy. China, however, is more equipped to deal with these tariffs than they were previously – they have past experience to look to and have decreased reliance on the U.S. for imports in the past few years.
There is a real question of how China should respond to the tariffs imposed by the U.S. So far, their outward stance has been one of staunch resistance, insisting they will fight the U.S. to the last. The U.S. has maintained a similar front, but it’s difficult to determine what sorts of talks might be happening behind the scenes. At this point in time, it’s near impossible to make a definitive decision about whether either country should increase or decrease their tariffs on the other. In the end, China may have to prioritize the strength of their economy over winning a tariff war with the U.S. On the other hand, the two goals might coincide. Even people who spend their whole lives studying economics cannot reliably predict how the economy will react to various stimulus, only time will tell whether these retaliatory tariffs will be beneficial.
The initial tariffs implemented by the U.S. are protectionary, intended to protect U.S. jobs and industry. However, they are also a reflection of the larger power struggle between the U.S. and China. China is looking to challenge the U.S.’s hegemony and become a world power themselves. The U.S., while pulling back from direct interventionism in the world’s conflicts, do not want China to replace the void those withdrawals create, especially since China is a (mostly) communist country.