Goldman Sachs on what a second Trump presidency means for China

BEIJING — If Donald Trump wins the U.S. presidential election, his plans for 60% tariffs on Chinese goods could be a “major downside growth risk” to China, according to Goldman Sachs.

Chances of Trump becoming the next president ticked higher after he survived an assassination attempt on Saturday and selected former critic JD Vance as his running mate two days later.

“Right now exports are a major bright spot in the Chinese economy, and I think the policymakers might want to be prepared,” Hui Shan, chief China economist at Goldman Sachs told CNBC’s “Squawk Box Asia” on Tuesday.

“We are seeing tariff narratives, not only in the U.S., but across other major trading partners of China’s,” she said. “So this is not going to be a sustainable driver of growth for China.” 

The U.S. is China’s largest trading partner on a single-country basis, while the European Union has fallen behind Southeast Asia as China’s largest regional trading partner. Trump had raised duties on Chinese goods when president in 2018 and has threatened to increase them to 60% if reelected this fall.

The contribution of goods exports to real GDP growth in China for the second quarter of this year was the highest since the first quarter of 2022, when Covid restrictions limited domestic economic activity, according to Citi.

Meanwhile, Beijing’s push to develop high-end manufacturing has not yet been able to fully offset a real estate slump and lackluster consumption.

U.S. officials such as Treasury Secretary Janet Yellen have said that China’s policies to boost its industrial capability and technological self-reliance have led to U.S. job losses.

In his first interview since he was selected as Trump’s running mate, Vance told Fox News that instead of the war in Ukraine, China was the “real issue” for the U.S. and posed the “biggest threat.”

The Biden campaign has criticized Trump’s pick, saying the choice was deliberately made “because Vance will do what Mike Pence wouldn’t on January 6: bend over backwards to enable Trump and his extreme MAGA agenda, even if it means breaking the law and no matter the harm to the American people.”

Supporters of Trump, who was president at that time, had stormed the U.S. Capitol in an attempt to overturn the 2020 presidential election results on January 6, 2021.

Asked about Vance’s comment, China’s Ministry of Foreign Affairs spokesperson Lin Jian said Tuesday at a daily press briefing, “We are always opposed to making China an issue in U.S. elections.”

China’s economy grew by 4.7% in the second quarter compared to a year ago, missing economists’ expectations and bringing growth for the first half of the year to 5%. It prompted some calls for more stimulus if the world’s second-largest economy is to reach 5% growth for the full year.

The downside risk from potentially higher U.S….