New US Tariffs Spell Doomsday for China’s Economy

An economist foresees the meltdown of China’s economy as a result of U.S. tariff increases

Two staff members stand at a port in Qingdao in China's eastern Shandong Province on April 17, 2019. STR/AFP/Getty Images

Editor’s Note: This is an abridged translation of an article by Wang Shangyi, which was originally published in SecretChina on May 27.

The additional 25 percent tariff imposed by the United States on $200 billion worth of Chinese goods will trigger a new round of factory closures in China, driving economic collapse.

After more factories close, foreign exchange earnings will decrease, prompting Chinese officials to reduce foreign exchange purchases and implement more stringent foreign exchange controls. In addition, the domestic financial system will take a hit, which will further escalate economic and financial collapse.

Factory Closures and Relocations

The 25 percent tax rate will reduce Chinese exports in two ways. Firstly, it directly halts the export of a considerable amount of products, and factories will rapidly transfer orders and production capacity outside of China. In the short term (within one year), this will exceed $50 billion, or even up to $100 billion. In the medium term (within two years), the majority of production could be transferred abroad.