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China eyes $1 trillion trade surplus milestone; US and EU eye stricter tariffs

admin by admin
November 12, 2024
in Politics
0
China eyes $1 trillion trade surplus milestone; US and EU eye stricter tariffs

China is on track to achieve a historic milestone, with its trade surplus projected to reach an unprecedented $1 trillion by the end of 2024.

This surge, driven by booming exports and a slowing domestic economy, is raising alarms among major global economies, including the US and the European Union, which could respond with stricter trade measures.

China’s trade surplus reached $785 billion in the first ten months of 2024, marking a 16% year-over-year increase.

This robust figure, the highest ever recorded for this period, underscores the strength of China’s export market even amid declining export prices.

According to a Bloomberg report, analysts say that Beijing’s economic growth is increasingly fueled by exports as domestic consumption remains weak despite recent government stimulus efforts.

The expanding trade gap has prompted concerns from major trade partners. President-elect Donald Trump is expected to introduce tougher tariffs on Chinese goods, potentially reshaping China’s export strategy and trade relations.

European and South American countries are also adopting protectionist stances, imposing tariffs on key Chinese products such as steel and electric vehicles.

Tariffs and reduced foreign investment add pressure

As trade tensions rise, foreign direct investment (FDI) in China is showing signs of decline.

The potential for net outflows in 2024 marks a significant shift, suggesting that foreign businesses are reassessing their involvement in the Chinese market amid growing protectionist policies worldwide.

The reduced FDI underscores diminishing confidence in China as a stable investment hub.

To counterbalance weak domestic demand, Chinese industries have ramped up their export operations.

The nation’s imports continue to trail behind its export levels, leading to a surplus that now accounts for 5.2% of its GDP in the first nine months of 2024, a proportion not seen since 2015.

This aggressive export strategy has helped China maintain its economic growth but has widened trade gaps with global partners.

China’s trade surplus with the US has risen by 4.4% this year, adding strain to already tense relations.

Additionally, its trade surplus with the European Union has grown by nearly 10%, while exports to Southeast Asian nations within ASEAN have surged by 36% year-over-year.

The widening trade imbalances highlight China’s deepening footprint in international trade, as it now exports more goods to over 170 countries than it imports from—a threshold last observed in 2021.

Currency tensions

The growing trade imbalance could spark currency volatility.

The People’s Bank of China may consider depreciating the yuan to further boost export competitiveness, which could lead to a wider trade surplus.

Such a move would likely escalate currency tensions, particularly with India, which has indicated its willingness to let the rupee depreciate in response.

China’s trade surplus with India has already reached $85 billion in 2024, marking a 3% increase from the previous year.

As the global trade landscape shifts, China’s record surplus could trigger significant economic and policy reactions from its major trading partners.

The coming months will test how nations navigate the complex web of trade, tariffs, and currency dynamics.

The post China eyes $1 trillion trade surplus milestone; US and EU eye stricter tariffs appeared first on Invezz

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