Let’s begin with the immediate, direct economic impact of tariffs. China has diversified away from the US market since Trump’s first term. Total American demand for Chinese goods now accounts for about 2.8 per cent of China’s GDP, according to Capital Economics.
Its calculations suggest that an increase in the effective tariff from around 15 per cent to 60 per cent (in extremis) — as Trump has threatened — could shrink the Chinese economy by a mere 1 per cent. (Other economists end up in the same ballpark.) That’s perhaps smaller than many thought, and it is also before considering other offsetting factors.