New Delhi [India]: China’s economy is in a weaker position than before, making it substantially harder to withstand new US tariff hikes, according to a report by Moody’s Analytics.
The report comes after US President Donald Trump announced higher tariffs on goods from China, Mexico, and Canada, fulfilling one of his key campaign promises.
New US Tariffs Take Effect
The new tariffs, set to take effect from Tuesday, add an extra 10% on Chinese goods, raising the effective tariff rate to nearly 20%, when combined with existing trade duties.
In response, Canada and Mexico have announced retaliatory tariffs, while China has remained cautious in its reaction.
“While Canada and Mexico announced plans to retaliate with their own tariffs, China’s response has been more muted,” said Harry Murphy Cruise, Head of China and Australia Economics at Moody’s Analytics, in the report.
China’s Economy Faces Greater Challenges
Unlike previous trade disputes, China now faces a weaker economic position, making it more difficult to absorb the impact of higher tariffs, the report noted.
“The tit-for-tat trade war in Trump’s first term benefited no one; it made trade more costly and hindered growth in both countries. Making matters worse, China’s economy is in a much weaker position this time around; it will be substantially harder for it to withstand a barrage of tariffs,” the report stated.
China Looks to Ease Trade Tensions
Moody’s Analytics suggests that China is focused on reducing trade tensions rather than escalating them.
In January, Chinese Vice Premier Ding Xuexiang told the World Economic Forum in Davos that China aims to increase imports of competitive and high-quality products and services to rebalance trade, in an apparent reference to its large trade surplus with the US.
Despite the challenges, China has not yet announced retaliatory tariffs, signaling a cautious approach in handling trade disputes.