New trade tariffs under a potential Trump 2.0 are a risk to exports, currently a key engine of growth. Still, trade diversion (through countries like Vietnam/Mexico) mitigates effects of trade tariffs over time. Meanwhile, domestic demand remains weak; we cut our 2024 growth forecast to 4.9% (from 5.1%), ABN AMRO Senior Economist Arjen van Dijkhuizen notes.

Beijing focuses more on the supply than the demand side

“As expected, quarterly GDP growth in Q2-24 slowed from an above trend pace of 1.5% qoq s.a. in Q1 to 0.7%, while annual growth slowed more than expected on revisions, to 4.7% yoy (Q1: 5.3%). We still expect some payback in Q3, but cut our 2024 annual growth forecast to 4.9%, from 5.1%.”

“Exports are currently a key driver of growth, although export growth slowed in July. What is more, China’s supply-focused strategy contributes to a broadening of trade spats, with the US/EU (and others) protecting strategic sectors against Chinese (over)supply. This risk would rise under a potential ‘Trump 2.0”. Trump threatens with a 10% universal tariff and higher (±60%), broader China-tariffs compared to his first tariff war in 2018-20.”