{"id":229221,"date":"2025-10-21T05:40:12","date_gmt":"2025-10-21T05:40:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/229221\/"},"modified":"2025-10-21T05:40:12","modified_gmt":"2025-10-21T05:40:12","slug":"how-trumps-tariff-trade-war-is-impacting-global-economies-and-what-china-is-doing-to-resist-it","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/229221\/","title":{"rendered":"How Trump\u2019s tariff trade war is impacting global economies \u2013 and what China is doing to resist it"},"content":{"rendered":"

The property sector<\/a> also continues to shrink, with a 13.9 per cent fall in property investment relative to the same period last year.<\/p>\n

New home prices fell 0.4 per cent from August and secondary market housing dropped 0.6 per cent. New home prices are now more than 10 per cent off their peaks and \u201cused\u201d homes nearly 20 per cent. Prices are now back to their levels before the pandemic and before Xi introduced the \u201cthree red lines\u201d policy<\/a> that blew up the market.<\/p>\n

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September was the worst month for the property market this year, which will cause some concern at the plenum as it is the major factor behind the weak levels of consumer confidence and spending that have resulted in deflation over the past two and a half years.<\/p>\n

Nominal GDP growth of 3.7 per cent underscores how significant the rate of deflation has become and how threatening it is to any rebound in domestic confidence and consumption. At the heart of the weaknesses in the domestic economy is the continuing slump in the property sector, which Beijing has been unable to arrest.<\/p>\n

The outcomes from the plenum will be closely watched to see if the party leadership plans to do something more substantial to boost domestic consumption than the piecemeal and relatively ineffective measures it has tried to date.<\/p>\n

The strongest growth areas within China\u2019s economy were, as expected, those targeted by (and subsidised by) the last five-year plan: electric vehicles, computers, communications and other electronic equipment manufacturing, ships and aircraft.<\/p>\n

The 16 per cent growth, year-on-year, in the value-add of the auto sector highlights both the unbalanced nature of the economy and the structural imbalances within it.<\/p>\n

Even though few, if any, of China\u2019s auto manufacturers generate profits, they are producing a swelling tide of vehicles<\/a> which \u2013 with domestic demand soft and endless cycles of price wars in the domestic market \u2013 have been pouring into export markets where there are better margins.<\/p>\n

That is creating tension and pushback from within those markets, with other countries starting to move to protect their own auto industries from China\u2019s cheap electric vehicle exports.<\/p>\n

The auto sector is one of the industries targeted by Beijing in its campaign against \u201cinvolution,\u201d<\/a> or over-capacity, and the cut-throat competition that is helping to drive deflation.<\/p>\n

The sub-economic nature of those exports, and exports of other manufactured products also suffering from involution, shows up in the trade data, where growth in the volume of China\u2019s exports is significantly outpacing the increase in their value.<\/p>\n

\"Chinese<\/p>\n

Chinese electric vehicle manufacturers are producing cars at breakneck speed.Credit: Bloomberg<\/p>\n

Other sectors earmarked for consolidation are China\u2019s coal and steel industries, both of which produced less last month as demand weakened and companies started to fall into line with Beijing\u2019s demand to reduce overcapacity. Coal production was down 1.8 per cent year-on-year and steel output 4.6 per cent, which isn\u2019t good news for Australia\u2019s iron ore miners.<\/p>\n

The increased reliance on exports for growth makes China vulnerable. It has largely shrugged off the direct effects of Trump\u2019s trade wars<\/a>, but the growing resistance to its exports elsewhere is a threat to its mercantilist strategy.<\/p>\n

It needs a better balance between domestic activity and external trade, which is something the leadership has no doubt grappled with ahead of the plenum, although Xi is expected to double down on his long-term ambition of global domination of advanced manufacturing, along with self-sufficiency in the targeted sectors and their supply chains.<\/p>\n

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The plenum isn\u2019t expected to set GDP growth targets for the next five years \u2013 the last one didn\u2019t \u2013 but China needs growth of only about 4.5 per cent in the December quarter to meet the target of \u201caround 5 per cent\u201d that it began this year with.<\/p>\n

It needs growth of around 4.7 per cent or 4.8 per cent a year for the next five years to meet Xi\u2019s ambition, set as part of the \u201cMade in China 2025\u201d strategy<\/a> \u2013 the plan that has driven China\u2019s global leadership in electric vehicles, solar cells and shipping and seen dramatic increases in its development of artificial intelligence, semiconductors, a domestic aviation industry, biotech and other strategic sectors \u2013 of doubling the size of economy by 2035, relative to its size in 2020 when the strategy was developed.<\/p>\n

Trump\u2019s trade wars could complicate China\u2019s ability to achieve that goal, even though the US now represents a market for only about 10 per cent of China\u2019s exports.<\/p>\n

China thrived in a free trade environment, but Trump\u2019s tariffs on everyone is forcing other economies to become more defensive and protectionist<\/a>. That adds to the need for China\u2019s to rebalance the relationship between domestic consumption and exports.<\/p>\n

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Trump and Xi are supposed to meet on October 31, with Trump identifying rare earths, fentanyl and soybeans as his priorities.<\/p>\n

Tensions over China\u2019s dominance of rare earths flared after China \u2013 in response to a US tightening of restrictions on sales of advanced semiconductors to Chinese companies \u2013 tightened and broadened its own export restrictions on rare earths and permanent magnets, which are essential to most advanced manufactures and critical to many military technologies. Trump then threatened a 100 per cent tariff on all imports from China.<\/p>\n

Even though Trump struck a deal with Anthony Albanese<\/a> overnight to get access to Australia\u2019s plentiful reserves of rare earths, it will take many years before the US can shed its dependence on China\u2019s rare earths and rare earth magnets and the vulnerability that has created.<\/p>\n

Trump brought knives \u2013 his tariffs, and access to the US market \u2013 to the trade confrontation with China. Xi brought a bazooka and made it very clear that he, not Trump, has the leverage in the next round of trade negotiations.<\/p>\n

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"The property sector also continues to shrink, with a 13.9 per cent fall in property investment relative to…\n","protected":false},"author":2,"featured_media":229222,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-229221","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/229221","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=229221"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/229221\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/229222"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=229221"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=229221"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=229221"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}