US tariffs strike puts 20 million Chinese jobs in peril
President Trump’s move will ‘generate substantial pressures on the Chinese economy and labor market’
You know China is spooked when fears about economic growth and rising unemployment threaten social stability. As Beijing grapples with a full-blown trade war with the United States, President Xi Jinping’s regime is desperate to shore up the jobs market.
Up to “20 million workers,” or roughly 3% of China’s labor force, risk being swept away by Washington’s tariffs after President Donald Trump imposed 145% duties on Chinese imports.
“The combination of extremely high US tariffs, sharply declining exports to the US, and a slowing global economy [are] expected to generate substantial pressures on the Chinese economy and labor market,” Goldman Sachs economists led by Andrew Tilton said in a report.
“We estimate that 10 to 20 million workers in China may be exposed to US-bound exports,” the study by the American multinational investment bank revealed.
Deflation [in China] risks becoming entrenched.
Fitch Ratings
Data trap:
- Unemployment is already spiraling in China amid an AI and automation boom.
- Those aged between 16 and 25 have been badly hit with the jobless rate ballooning.
Delve deeper: There are other deep-seated problems, such as jumpstarting consumption amid stagnating wages across the private and public sectors. Chaos in the real estate market has already “destroyed US$18 trillion” or 70% of household wealth.
Between the lines: “To offset the shock of sweeping US tariffs, Beijing needs to ramp up domestic demand and help offset the loss of a market that absorbed US$525 billion of Chinese goods last year,” Bloomberg News reported.
Big picture: Exports have been used as a blunt instrument to keep China’s GDP growth at 5%. But the costs have been high as trading partners baulk at the flood of cheap imports.
Bottom line: Inside the world’s second-largest economy, “deflation risks becoming entrenched,” Fitch Ratings pointed out at the end of last year.
China Factor comment: The ruling Communist Party has been rolling out measures to boost consumption to rebalance its export-first model. But this is five years too late, and it could take more than a decade to kickstart domestic demand.