China's Export Growth Slows Amid Trump Tariff Threat

China's export growth slowed in November, with exports up 6.7% year-on-year, missing expectations of an 8.5% increase. Imports shrank 3.9%, compared to expectations for a 0.3% increase. This slowdown comes as U.S. President-elect Donald Trump has pledged to slap an additional 10% tariff on Chinese goods, raising concerns about potential retaliatory measures from China.

The slowdown in export growth is a worrying sign for China's economy, which has been struggling with sluggish domestic demand and a property market crisis. The trade surplus rose to $97.4 billion in November, up from $95.72 billion in October, as exports outpaced imports. However, the slowdown in export growth suggests that the trade surplus may not continue to rise at the same pace.

The threat of increased tariffs from the U.S. is a significant concern for China, which relies heavily on exports to drive economic growth. A 60% tariff, as threatened by Trump, would make Chinese goods less affordable in the U.S., potentially leading to a decline in demand. This could force Chinese exporters to either absorb the higher costs, reducing profit margins, or pass them on to consumers, making their products less competitive.

China's exports to the U.S. have already been declining as a share of total exports, falling from 19% in 2018 to 15% last year. The U.S. accounts for around 19% of China's exports, so a substantial reduction in U.S. demand could have a significant impact on China's overall export growth.

In response to the threat of increased tariffs, China may take retaliatory measures to protect its exports. These could include imposing tariffs on U.S. goods, restricting access to its market, or devaluing its currency to make its exports more competitive. However, such measures could also lead to a currency war with the U.S., with both countries engaging in competitive devaluation to gain a trade advantage.

The slowdown in export growth and the threat of increased tariffs from the U.S. highlight the challenges facing China's economy. The country is already facing headwinds from a battered housing market and sluggish consumer demand. A trade war with the U.S. could further destabilize the economy, leading to slower growth and increased unemployment.

In conclusion, the slowdown in China's export growth and the threat of increased tariffs from the U.S. are worrying signs for the Chinese economy. The country faces significant challenges in maintaining economic growth and protecting its exports in the face of a potential trade war. Investors should monitor the situation closely and consider the potential impact on their portfolios.