uploads///Chinese economy

Chinese Economy Feels the Heat from Trump’s Tariffs


Aug. 14 2019, Updated 2:50 p.m. ET

In the second quarter, the Chinese economy expanded at the slowest pace in 27 years. On Wednesday, China released a series of economic data points that were far worse than expected. President Trump’s tariffs have compounded China’s slowdown.

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Chinese economy

China released several data points for July including retail sales, industrial production, fixed-asset investment, and services production. All of the data points were worse than expected. The dismal economic data points compounded China’s slowdown fears. Notably, the Chinese economy expanded at 6.2% in the second quarter—the slowest pace in 27 years. President Trump’s tariffs have only aggravated China’s slowdown. He mocked China’s weak second-quarter GDP. President Trump said that the tariffs impacted China. However, China delinked the trade deal from its economic growth.

Analyzing economic data points

China’s retail sales increased 7.6% in July compared to 9.8% in June. According to a press release from China’s National Bureau of Statistics, “the retail sales of consumer goods excluding automobiles increased by 8.8 percent.” Falling car sales impacted China’s retail sales. The car sales fell in July. Overall, China’s car sales have fallen year-over-year for 13 consecutive months. China’s retail sales were better than expected in May and June.

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The industrial production growth fell to a 17-year low of 4.8% in July. The metric was 6.3% in June. Notably, the industrial sector has been sagging in the US as well. The US manufacturing PMI fell to the lowest level since 2009. President Trump’s trade war hit the US industrial sector and corporate investments. Fixed-asset investments, which are a key pillar of the Chinese economy, also faltered last month. In the first seven months of 2019, China’s fixed-asset investments rose 5.7%. The growth rate was 5.8% in the first six months of the year.

Previous data points

The data points aren’t isolated economic indicators. There has been a flurry of weak data points. China’s producer price index fell into the negative zone last month for the first time in three years. The country’s imports have also sagged, which reflected weak domestic demand. China’s July manufacturing PMI was also below 50, which reflected a contraction in manufacturing activity.

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Chinese economy and Trump’s tariffs

The Chinese economy is within the range set by its leadership. However, President Trump’s tariffs deepened its slowdown. China alluded to the tariffs when it released the economic data. In the press release, China’s National Bureau of Statistics pointed to “mounting risks and challenges both at home and abroad.” The press release also said, “we must be aware that given the complicated and grave external environment and the mounting downward pressure on the economy at home.”

IMF also feels tariffs hurting the Chinese economy

The IMF has also said that President Trump’s tariffs hurt the Chinese economy. According to the IMF, “the intensification of trade tensions has inevitably affected the Chinese economy to an extent,” Notably, the IMF has lowered the Chinese economy’s 2019 growth forecast. The IMF said that the trade war impacted global growth. China’s slowdown concerns have also taken a toll on its stock markets. The iShares China Large-Cap ETF (FXI) is flat for the year. US markets have seen strong gains despite the trade war. On Tuesday, the Trump administration provided some relief for US consumers by delaying tariffs on some Chinese goods. While US markets rallied on Tuesday, a trade deal still isn’t likely in the near term.


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