China’s Economy Is Slowing Down Due To Trade War

Will the Chinese economy bounce back this year with growth? Or is the trade-war taking too much of a toll on the country’s economy.

China’s economy is slowing down at an alarming rate as the trade-war with the United States worsens.

China has the worlds second largest economy and in Q3, 2018, the Chinese economy grew by a small 6.5%. That represents the worst quarterly growth in the Chinese economy since the financial crisis at the start of 2009. Economists forecasted the Chinese economy would grow by 6.6% in Q3.

The Chinese government’s main focus this year has been to lower debt levels. As debt rises and the levels of debt increase, growth decreases. Tariffs from the United States are set on over $250 billion worth of Chinese exports.

China has resorted to tax cuts and is spending on their infrastructure, not to mention making more slack monetary policy in attempts to increase growth.

Our analysts expect China’s growth slowdown to stop around next July.

The fear of trade-war is causing the Chinese stock markets to drop significantly as the uncertainty makes it difficult to forecast their consumer spending. The Yuan has also been plummeting in recent times. Until trade-war talks simmer, it is unlikely that growth will spike for the Chinese economy.

As investors panic, Chinese officials made a rare announcement on Friday. Central bank chief Yi Gang said that the stock market slump did not represent the Chinese economy as a whole. He followed by saying that the economy is “moving forward” in a healthy way.

Yi Gang then continued to say that the government would be supporting the economy more than it has been. This means that new initiatives and measures will be taken by the government to ensure growth going into Q4 of 2018. The head of China’s securities and banking regulators also said the same thing. On Friday, Shanghai stocks experienced gains of 2% at the end of the trading day.

U.S/China Trade War

trade war
Chinese industry workers

The trade war between the United States and China is likely to impact the Chinese economy in future quarterly reports. The government expected the economy to grow by 6.5%, which it did. Although, many analysts speculate the accuracy of the data surrounding the Chinese economy. Instead, many experts will analyze the volume of freight shipments that China experiences as a more accurate quantifier.

To make things worse, the Trump administration intends to raise tariffs even further on Chinese goods from 10% to around 25% by the end of 2018. These tariffs are likely to be on all Chinese exports into the U.S. Last year over $500 billion worth of products was imported into the U.S.

September saw a sharp increase in Chinese exports to the U.S, which is likely due to manufacturers looking to get products to the U.S before tariffs get increased.

The trade war was initiated in March and steel imports are under a 25% tariff. In May the Trump administration expanded the trade tariffs to Mexico, Canada and the EU.

How much of economic growth is attributed to President Trump?