US President Donald Trump's higher tariffs on Chinese goods may prompt a stronger response from Beijing, including targeted stimulus and potential retaliation.
Trump has imposed a surprise 34% tariff on Chinese goods, bringing total levies to 54%, has raised risks of Chinese retaliation and accelerated decoupling, said Lynn Song, ING chief economist for greater China.
The tariffs could result in China's US trade surplus, 2% of gross domestic product, to shrink faster and push Beijing toward domestic stimulus, Song said. They will also likely add to deflationary pressure. with the tariff barriers likely to worsen China's overcapacity issues.
"Amid deflationary pressure and the potential hit to growth, the People's Bank of China could be incentivized to ease policy for the first time this year," Song added.
Song noted that the PBOC may bundle rate cuts of 30 basis points and reserve requirement reductions of 100 bps to counter headwinds, but deliberate yuan devaluation remains unlikely.
The next key date is April 5, when the moratorium on the US TikTok ban expires, Song added.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.