China aims to stabilize its economy, but Trump’s actions could disrupt its efforts.

China plans new economic measures, bracing for the impact of a second Trump presidency. Trump’s platform includes tariffs up to 60% on Chinese imports, potentially hindering Xi Jinping’s push to make China a tech leader and increasing U.S.-China tensions.

China’s economy, weakened by a property slump, rising debt, unemployment, and low consumption, is awaiting a pivotal announcement from the Standing Committee of the National People’s Congress (NPC) to address these challenges.

Trump imposed tariffs up to 25% during his first term, and China analyst Bill Bishop believes Trump will follow through on his recent tariff threats, citing issues like perceived breaches of previous trade agreements and Covid-related setbacks.

Washington’s pressure on China continued under Biden, as tariffs remained and in some cases expanded, affecting China’s weakened post-pandemic recovery. Growth has struggled to meet pre-pandemic levels since China lifted Covid restrictions two years ago, leading to economic underperformance and prompting the International Monetary Fund (IMF) to cut China’s growth forecast to 4.8% in 2024, with further drops expected in 2025.

Xi Jinping’s 2017 goal to move toward “high-quality development” reflects China’s strategy to focus on advanced manufacturing and green industries. Yet some economists, like Stephen Roach, warn that China may face prolonged stagnation similar to Japan’s post-bubble era. To avoid this, Roach suggests China should stimulate domestic demand and reduce dependence on exports and investments, potentially stabilizing its economy and mitigating U.S. trade pressures.

New economic strategy, same old challenges.

China, once known for low-cost goods, is now aiming to lead in high-tech exports like solar panels, electric vehicles (EVs), and lithium-ion batteries. It dominates solar panel production, making up over 80% of the market, and is the top producer of EVs and their batteries.

China’s clean energy investments account for a third of the global total, and its export growth in 2023 for EVs, batteries, and solar panels hit 30%, exceeding one trillion yuan ($139bn). This boost has helped offset the impact of the property crisis.

However, as China’s exports grow, so does resistance, especially from Western countries. The EU recently raised tariffs on Chinese-built EVs to 45%, and the U.S. under Trump could further limit imports. As China looks to strengthen its economy, it must consider if these measures will be enough.