Why a trade war with Trump threatens China’s ruin
The impact of US tariffs could tip Xi Jinping’s teetering economy over the edge
Understanding how China’s economy really works is difficult at the best of times. Its statistics agencies do not regularly publish data on things like local employment and, when they do, observers are often sceptical of the accuracy of the figures.
Sometimes authorities simply stop publishing data altogether, such as when youth unemployment hit a record high last year.
So when two professors wanted to examine the impact of the former Trump administration’s trade tariffs, they turned to something even President Xi Jinping could not hide: light.
Using satellite imagery, Davin Chor and Bingjing Li measured how many fewer lights were on at night across China once the tariffs were introduced. The pair were examining a long established proxy for economic activity.
Between the start of 2018 and the start of 2019, after Trump’s first tariffs kicked in, China’s industrial heartlands got darker – proof that factories were operating shorter shifts, cutting night-time production, and evidence that fewer workers were staying in factory dormitories.
Around 3.5m people in China lived in areas where GDP per capita plunged by 2.5pc over two years as a result of the tariffs, estimates Chor, who is globalisation chairman at the Dartmouth College’s Tuck School of Business. In simple terms, that is hundreds of dollars lost from a person’s annual income.
Everything is about to get much more dramatic as America’s president-elect gears up for a massive escalation in the US-China trade war.
In June 2018, Trump announced 25pc tariffs on $50bn (£40bn) worth of Chinese goods, which started to kick in the following month. This time around, he has pledged to impose 60pc levies on all Chinese goods after he is sworn in as president in January.
The US could go even further. John Moolenaar, chairman of the House select committee on China, has introduced legislation to strip the country of its “most favoured nation” status. This could mean introducing tariffs of up to 100pc.
Whether tariffs are set at 60pc or 100pc, the impact of a US trade war would be devastating for China. The economy is already grappling with a property crisis and a slowdown in consumer spending.
Economists warn 60pc tariffs will cost millions of jobs, deal a hammer blow to President Xi Jinping’s growth targets and sow the seeds of major social unrest.
