Assuming that Trump’s positions in the first weeks of his administration are not just fleeting occurrences but rather reflect a new course for the United States, will they impact China’s economic prospects?
Before addressing that question, attention must be paid to China’s structural strengths—those that do not depend on external factors. There are at least six such advantages in its favor.
First, the vast size of its domestic market ensures low average production costs and, consequently, relatively low prices for high-tech products and heavy industry, which are characterized by high entry costs, relatively large minimum plant sizes, and economies of scale. Whether or not it has access to external markets, Chinese companies can produce at competitive prices even in the most complex and large-scale sectors.
Second, China’s savings-to-GDP ratio—around 45%—is significantly higher than that of most Western economies (e.g., the U.S. stands at about 18%) and the global average (27%). This gives China ample room to increase consumption without endangering macroeconomic stability. In the face of trade wars, this could help mitigate the impact on GDP from a decline in exports.
Third, China has historically invested in high-quality education, resulting in a highly productive and adaptable workforce. Additionally, an educated population is better equipped to accept budgetary constraints, understand the importance of sacrificing short-term aspirations for long-term national strategic goals, and weigh the conflicting factors that must be considered in development policymaking. All of this fosters high levels of social cohesion—a critical factor for investment rates and GDP growth.
Fourth, since ancient times, China has cultivated a strong appetite for knowledge and technological solutions to production problems. It invented gunpowder, mechanical clocks, the compass, the printing press, and paper, among other tools, long before the rest of the world even imagined them. After the 1979 reforms, substantial budget allocations for R&D have reinforced this scientific appetite, allowing China to compete head-to-head with the West in various high-tech sectors.
Fifth, in terms of economic growth alone, China’s political system has strengths not found in other countries. On one hand, Chinese authorities are pragmatic—not ideological—when selecting and implementing economic policies (“What matters is that the cat catches mice, not its color,” said Deng Xiaoping, the architect of the 1979 reforms). As a result, they have a full range of microeconomic, fiscal, and monetary tools to achieve their goals. On the other hand, the one-party system ensures not only social stability but also continuity in objectives, strategies, and policies, all of which encourage private capital to invest and take risks in complex long-term projects.
Finally, from 1839 to 1945, China suffered attacks, invasions, and defeats at the hands of Western powers and some neighboring Asian countries. These 106 years of aggression, known in Chinese narratives as the “Century of Humiliation,” are deeply ingrained in China’s collective psyche, giving top priority to unity, self-protection, and national strength. This mindset promotes hard work, sacrifice, entrepreneurship, and social harmony. It not only facilitates the work of the ruling Communist Party—which played a key role in ending that humiliation—but also contributes positively to the competitiveness of the economy.
The West might choose to manifest its animosity toward China—driven mainly by economic fears—through tariff wars aimed at halting its progress, ignoring the fact that these historical-structural factors provide China’s progress with its own momentum and self-sustainability. Yes, China’s exports-to-GDP ratio is relatively high, at nearly 18%. But even if tariffs reduced its external sales by 20%—to 14.4% of GDP (a highly unlikely event)—domestic consumption could easily compensate for this drop in aggregate demand by reducing the savings-to-GDP ratio by 3.6 percentage points, bringing it to around 41%, still well above Western average savings rates. In this scenario, the impact of tariffs on GDP would be minimal—if any—while improving consumption and quality of life within China.
On the other hand, President Trump may, unwittingly, be turning into a key player for Team China. He seems to have embarked on a crusade to make enemies out of friends and to befriend countries deeply discredited among the U.S.’s Western allies.
Cuts to international aid budgets are erasing any hope that there was even the slightest coherence between the Christianity proclaimed by much of his political base and the idea that American capitalism is not predatory, while also wreaking havoc on many countries and people who benefited from that aid.
The forced expulsion of migrants and their return to countries already struggling with poverty and unemployment—yet forced to accept them due to trade-related blackmail—demonstrates zero respect for human rights and an alarming willingness to use economic power to impose unilateral decisions.
The resurgence of the imperialist 19th-century Monroe Doctrine (“America for Americans”) and Manifest Destiny (the U.S.’s supposed right to expand its territory) is damaging relations with Denmark, Palestine, some Arab countries, Canada, Panama, and Mexico, serving as a warning to the rest of the world.
His mercantilist-protectionist trade practices and threats against both friends and foes disrupt legally binding multilateral trade rules and bilateral trade agreements—rules that the very country he leads had long promoted, if not imposed. For instance, linking trade policy (and personal sanctions—already applied against two Costa Rican lawmakers simply for supporting Huawei’s participation in the bidding for 5G technology development) to the U.S.’s geopolitical struggle against China blatantly betrays one of the key propaganda arguments used to promote the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR): that approving the deal would completely shield trade relations from geopolitics and changes in U.S. administrations.
Rather than simply impressing or intimidating as a determined cowboy riding the reins of power (an image he may be aiming for), Trump may be leading many people worldwide to question the sincerity, values, and true intentions of the United States. Many leaders today might be wondering whether it would be better to strengthen ties with a China eager for trade relations driven solely by price and quality, rather than with a mercantilist and extortionist United States willing to use any means to achieve its goals.
Thus, Trump’s statements and decisions may actually be improving China’s economic prospects and global perception, complementing the structural factors already working in favor of the Asian giant.
*Machine translation proofread by Janaína da Silva.
