Tariffs and restrictions on new technologies imposed by the Biden administration on China could affect the U.S. economy when Beijing is experiencing a significant economic slowdown.
After barely increasing for several months, consumer prices in China fell by 0.3% in July, a phenomenon known as deflation that indicates the Chinese economy is faltering due to falling demand.
In addition, after years of rapid expansion, gross domestic product growth is slowing. It is expected to continue decelerating, which has far-reaching economic implications beyond Asia.
Economic Ripples: China’s Slowdown and Tariffs’ Global Impact
According to Scheherazade Rehman, a professor of international finance at George Washington University, China’s economic slowdown will directly impact the American economy.
Furthermore, the United States has imposed tariffs on China, further squeezing its economy. Former President Donald Trump controversially imposed the tariffs, which President Joe Biden maintained.
Adding to Beijing’s economic woes, Chinese manufacturing activity has contracted recently. China’s factory orders are down, domestic travel expenditures in China are down, and there is an overall drag on consumption across China.
Youth unemployment is rising in China, indicating the country’s dire financial situation. The urban unemployment rate for Chinese 16- to 24-year-olds now exceeds 21 percent. That is more than double what it was just a few years ago.
China is also facing a property crisis. The government shot itself in the foot by cracking down on the heavily indebted real estate market in 2020.
Rehman cautioned that if Beijing does not make the right decisions, the Chinese economy could stagnate for a very long time. That would have repercussions not only have repercussions for the U.S. but for the entire world.
This week, Biden signed an executive order to regulate and block the flow of high-tech investments from the United States to China.
China answered by saying it has “serious concern[s]” about the move and “reserves the right to take measures” in response.
U.S. farmers and energy producers will feel the first effects of the economic slowdown in China.
China imports a substantial amount of energy, so any broad-based economic slowdown in China will result in a decline in energy demand.
As soon as China begins importing fewer energy products, energy producers will suffer across the board, which could result in job losses in the United States.
China is also the world’s largest importer and consumer of U.S. agricultural products, so if demand for these products declines along with Beijing’s economy, so does the U.S. agricultural industry.
This will result in job losses in farming and agriculture in the United States.
If the slowdown worsens, more sectors of the U.S. economy will be affected, not just agriculture and energy.
Biden has addressed China’s economic issues directly. On Thursday, he labeled China’s economic situation “a ticking time bomb.”
He said Beijing was “in trouble” because of slowing growth and its unemployment rate.
“That’s not good because when bad folks have problems, they do bad things,” he said at a political fundraiser.
But if the push toward decoupling with Beijing continues, it could directly affect the U.S. economy and consumers.
“This relationship is so symbiotic that anytime you try to squeeze your partner, it will end up reverberating back on you,” Rehman said.
Source: Washington Examiner