China’s Export Boom Means Trump Tariffs Would Hit Beijing Where It Hurts
Economy is increasingly reliant on foreign demand for goods pouring out of Chinese factories
By Jason Douglas, WSJ
Updated Jan. 12, 2025 10:37 pm ET
China’s economy is more dependent on exports than it has been for most of the past two decades, leaving it vulnerable to a new broadside on trade from President-elect Donald Trump.
Chinese exports to the rest of the world grew 5.9% last year compared with a year earlier to $3.6 trillion, figures published Monday showed.
Those figures mean trade is on track to account for about a fifth of the 5% or so growth China is expected to report this year.
Aside from 2021, when consumers the world over were gorging on Chinese-made home appliances, fitness equipment and computer gear during Covid-19 lockdowns, that would mark trade’s biggest contribution to Chinese economic growth since 2006, when China’s exports were surging in the aftermath of its accession to the World Trade Organization in 2001.
China’s growing reliance on foreign purchases of manufactured goods to power growth reflects its economy’s struggles with a yearslong real-estate crunch and tepid consumer spending.
In response to those challenges, and to meet longer-term ambitions to transform China into a technological superpower, leader Xi Jinping has been funneling cash into the country’s factories. The result has been ballooning industrial capacity, tumbling prices and an export surge in everything from steel and chemicals to cars and machinery.
China’s exports exceeded its imports in 2024 by $992 billion, a record, reflecting not just buoyant exports but also subdued Chinese demand for the rest of the world’s goods and services.
China’s General Administration of Customs said exports to the U.S. rose 4.9% to $525 billion, despite the tariffs levied on Chinese goods during Trump’s first term and in some cases extended during the Biden administration. Exports to the U.S. jumped 16% year-over-year in December alone, a sign that firms and their U.S. customers might be rushing to bring in stock ahead of anticipated tariff hikes.
Trump on the campaign trail pledged to jack up tariffs on all Chinese imports to 60%, part of a series of aggressive trade moves aimed at reducing the U.S.’s chronic trade deficits and meeting other policy goals, including limiting immigration and tackling the trade in chemicals used to make the drug fentanyl.
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Chinese companies are in worse shape to handle rising tariffs than they were half a decade ago, when Trump first hit China with tariffs. Weak spending at home has contributed to two years of falling prices for manufactured goods, crushing corporate profit margins and pushing many firms into the red.
Economists say such a steep rise in tariffs on U.S. imports from China would be a big drag on growth, reducing gross domestic product in the year following their imposition by anywhere between 0.5% and 2.5%, depending on how aggressively China responds.
In the vanguard of Chinese exports are companies such as BYD, whose electric-vehicle sales overseas rose 72% in 2024, the company said this month, to almost 420,000. China in 2023 displaced Japan as the world’s largest car exporter, lifted not just by EVs but also by sales of traditional gasoline-powered vehicles to Russia.
Overall Chinese exports of electric passenger vehicles in 2024 totaled 1.29 million units, a year-on-year increase of 24.3%, the China Passenger Car Association said in a report this month.
As China’s exports have accelerated, so has the backlash from other countries. Major emerging markets have hit some Chinese imports with tariffs to shield domestic industries vulnerable to cut-price competition. Steel has been a particular flashpoint.
For Western economies, anxiety has centered on China’s growing clout in the auto sector and in renewable energy. The European Union in October imposed tariffs of up to 45% on made-in-China EVs, saying manufacturers benefited from unfair subsidies. The Biden administration last year imposed a 100% tariff on Chinese EVs.
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Beijing’s hope is that it can offset the pain from Trump’s promised tariffs on Chinese goods by selling more to other markets, aided perhaps by a controlled weakening of its currency. Officials have also pledged extra borrowing and other stimulus measures in an effort to firm up growth at home, too.
But the big risk for China is that the looming showdown with Washington morphs into a broader conflict with other nations over trade. Already, the EU, Brazil, India and others are smarting over a flood of cheap Chinese imports as Xi plows money into manufacturing, and might push back harder if China seeks to divert exports away from the U.S. in response to heftier U.S. tariffs.
A wider trade fight would make it much harder for Beijing to lean on exports as an engine of growth, economists say, heaping pressure on officials to fire up lackluster domestic spending—or settle for a much weaker expansion than the 5% or so China is expected to report for 2024.
In the past few months, Beijing has taken bolder steps to boost China’s domestic economy, including easing restrictions on home buying, juicing the stock market and offering consumers discounts for trading in old cars and home appliances for newer models. A debt-swap program is being rushed out to ease the financing burden at cash-strapped and overindebted local governments.
Vehicles waiting to be scrapped in Nanjing in eastern China’s Jiangsu province.
Vehicles waiting to be scrapped in Nanjing in eastern China’s Jiangsu province. Photo: str/Agence France-Presse/Getty Images
Beijing is due to announce new fiscal support for the economy in March, when leaders convene for the National People’s Congress, China’s top legislative body. Economists say Beijing will need to increase fiscal spending substantially to maintain economic growth in the teeth of worsening trade headwinds. Many expect growth to slow to between 4% and 4.5% this year.
Even so, Xi shows little sign of abandoning his focus on manufacturing as the engine room of China’s economy, despite worries about overinvestment and tumbling prices. For some economists, the longer-term question is whether the global economy can sustain that vision.
“The rest of the world just cannot absorb all the stuff that China produces,” said Stefan Angrick, senior economist at Moody’s Analytics.
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