Fitch identifies key challenges for Chinese corporates if Trump wins re-election

August 21, 2024 (MLN): Fitch Ratings believes that if Donald Trump wins a second presidential term, the primary challenges for Chinese corporates from potential US policy changes can be grouped into three themes: trade protectionism, weaker Chinese economic growth, and a rollback of US climate-related policies.

The agency’s analysis finds the technology hardware, new-energy manufacturing and autos sectors to be at risk of moderate to high impacts.

Moreover, Fitch focuses on the potential major policy shifts if Trump wins the presidential election in November 2024, and does not assess the positions of his opponent, Vice President Kamala Harris.

If she wins, the agency anticipates greater continuity of President Joe Biden’s policy positions.

A Republican win is likely to intensify protectionist measures against China, directly affecting Chinese exporters. Nonetheless, it would be difficult for the US to decouple from China in the medium term given China’s entrenched industrial supply chains.

More extensive trade barriers against China could lead to an export demand shock, forcing Chinese producers to shift surplus goods to the domestic market, sparking competition, price cuts and industry consolidation.

Fitch believes Chinese manufacturers would continue to expand overseas supply chains to counter these barriers, but this will require significant investments.

Deflationary effects and lower consumer and business confidence are the main potential feed-throughs within China, leading to substantial shortfalls in domestic economic growth.

Fitch’s analysis indicates a substantial impact on China's economic growth under a scenario in which the US imposes 60% tariffs on China goods imports and a 10% tariff on imports from the rest of the world.

Meanwhile, a potential rollback of US climate policies would dampen demand for electric vehicles and renewable energy-related products, affecting commodities including metals, mining and energy resources.

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