China’s International Import Expo (CIIE) is a trade show like no other. A total of 3496 exhibitors from 129 countries and regions were there, along with a record 297 Fortune Global 500 companies and industry leaders. All want to expand their business footprints in the massive Chinese consumer market.
But the volume of the sales pattern markedly shifted down as many shifted their attention to the latest results from the United States presidential election.
Donald Trump was trending as the next President – an outcome which affects the calculus not just of the Chinese Government (and that of New Zealand) but of exporting companies who have to make decisions about whether to double down in the US if Trump introduces his pledged tariff hikes or to divert product into other markets.
On that score, China has already signalled it is prepared to open its gigantic consumer market further to accommodate more foreign companies wanting to sell services or goods.
There was no mistaking the additional messaging from Chinese Premier Li Qiang this week that China would adhere to the rules-based international trading order. That was an unmistakable nudge to Trump, whose administration mounted a sustained assault on the World Trade Organisation during his first term as President.
Later, Chinese President Xi Jinping had a pertinent message of his own for Trump when he contacted him after he won the presidential election.
“History shows us that co-operation between China and the United States will benefit both sides, and the fight will hurt both sides,” news agency Xinhua reported Xi telling Trump.
That message has also been drilled domestically within the US by the Peterson Institute for International Economics, an eminent think tank that has used empirical research to underpin its findings that a cascade of existing US trade restrictions has not impeded China’s technological progress or its pace and that existing tariffs imposed on Chinese firms have in fact hurt American consumers.
For Trump, such logic is inconvenient. He has sold a simple calculus to voters: high tariff income will bring in the additional revenue to cut your taxes.
Left out is the fact that, in many cases, the upshot is also higher-priced goods for US consumers.
Irrespective, it was apparent that China is braced for a broader trade war, with the potential for higher tariffs across the board.
When it comes to detail, Trump has pledged a swingeing 60% tariff on Chinese imports to the US. Some estimates suggest that could reduce China’s exports by US$200 billion, causing a 1 percentage point drag on GDP. This could slow global growth.
Geopolitical tensions between China and the US will persist and advice in Shanghai during a range of meetings was that New Zealand businesses should be prepared to navigate increased compliance requirements and regulatory changes related to trade, technology and other areas affected by these tensions.
China may also continue to deepen its economic ties and trade relationships with countries in the Asean region as a response to potential US trade actions. Again, the advice was that New Zealand businesses should also assess their supply chain exposure and consider diversifying production locations or exploring alternative sourcing options to mitigate risks.
China faces some major economic structural challenges such as debt, deflation and demographics that could impact consumer confidence and spending behaviour.
New Zealand exporters closely monitor changes in Chinese consumer preferences and spending trends and can be expected to adapt their product and marketing strategies in this fast-changing market.
Above all, China values predictability in the political process and policy execution. A Trump Administration will be more unpredictable, which is not a desirable outcome for China.
Already there are signs that China may increase its foreign investment and efforts to reroute trade flows to circumvent potential US tariffs and restrictions.
Expectations are that Beijing will soon unveil a massive 10 trillion yuan stimulus package.
Trump will have to wait until after he is inaugurated as President on January 20, 2025, before he can return serve.
