U.S. tariffs on Chinese imports could put as many as 16 million jobs at risk in China, especially in the manufacturing of goods for retail and wholesale, said analysts at the U.S. investment bank Goldman Sachs. “If high U.S.-China tariffs were to persist and Chinese exports were to fall precipitously, labor markets would surely feel the pressure,” the bank said in a research report, adding the 16 million jobs are involved in the production of exports to the U.S. and nearly one-quarter would be in the wholesale and retail spaces. Goldman Sachs called communication equipment, apparel and chemical products “more vulnerable” than other manufactured goods due to their “high share in U.S.-bound exports from China”. U.S. President Donald Trump, to ameliorate trade deficits and boost domestic production, has imposed tariffs totaling 145% on Chinese imports so far this year, bringing the effective tariff rate to about 156%. According to a fact sheet released by the White House, China now faces tariffs of up to 245% on certain goods. In response, Beijing has applied tariffs of 125% – with some exceptions – on top of earlier duties.
The U.S. elimination of tariff exemptions for shipments below USD800 – the so-called de minimis rule – are also “exerting employment pressure” on China’s retail and wholesale sectors, the researchers said. Trump’s tariff hikes are most likely to impact China’s coastal provinces, said S&P Global Ratings, naming Guangdong, Jiangsu, Shandong and Zhejiang as well as Shanghai. Tariffs will strain the economies and budget revenues for these areas, which together account for about 40% of gross domestic product (GDP). “Recent tariff hikes at their current levels could have a long-lasting impact on China’s regional economies that trade most actively with the U.S.,” said S&P Credit Analyst Christopher Yip. “This comes at a time when local government debt burdens have markedly risen due to a prolonged property downturn, large-scale infrastructure spending and tepid tax revenue growth.”
Goldman Sachs said that, in the past, China’s central bank has tended to cut policy rates when facing a weak labor market. The bank said Chinese manufacturers might shift production to third countries and ship goods from there to the U.S. without paying the exorbitant duties – though Trump’s temporarily delayed “Liberation Day” tariff package targeted many potential bypass points. “Since most other countries are not subject to nearly as high tariffs as China, Chinese exporters may try to re-route goods through other countries,” Goldman Sachs said. “Re-routing, together with strong price competitiveness, is likely to maintain Chinese exports to other countries at solid levels,” he said, as reported by the South China Morning Post.
