Sitao Xu, the chief economist at Deloitte China, recently provided insights into the anticipated future of US tariffs on Chinese goods. He thinks the final tariff rate may end up closer to 35%. This new projection underscores the scale of the economic crisis that persists in China. These concerns are exacerbated by the usual internal pressure cooker and a wobbly real estate market.
Xu’s assessment comes amid increasing scrutiny of China’s economy. We heard that the US is using high, targeted tariffs as a bludgeon in their trade efforts. An increase of 35% would be doable for China, he argues. He cautioned that even such a high level of tariffs would do little to impact China’s net growth in today’s world.
Internally, China is dealing with a constellation of economic headwinds. Slow GDP growth, increasing unemployment and a drop in consumer confidence have made this an especially tough climate for policymakers to navigate. These mounting pressures have led to serious conversations about the success of popular government interventions launching on a regular basis to spur economic growth.
Most troubling is the state of China’s often opaque real estate sector. As it stands today, it is still far from recovered and that still represents a huge threat to overall economic stability. This sector’s long-standing lagging performance has widespread ramifications on how the rest of the country consumes, too. When the real estate market falters, household wealth is hit hard, thus impacting consumer spending and economic activity more broadly.
According to economists, the failure to recover in real estate may push the nation into a longer period of economic malaise. This could prevent consumers from making major purchases, adding to a number of existing problems that already have the economy on the cusp of recession. This complex interdependency between real estate performance and consumer behavior underscores the urgent need for effective, sustainable policy responses.