China isn’t about to let its export market go belly-up. Instead, it will do what it always does – pump money into its industries to soften the blow of U.S. tariffs.
By subsidizing the costs that tariffs impose, China inadvertently reduces the financial strain on U.S. importers. However, this move will make Chinese businesses lean more heavily on their government’s stimulus packages to keep the lights on.
Here’s where it gets interesting: Unlike the U.S., where stimulus might go directly to consumers, China directs its financial aid toward local governments and businesses. This means their economy relies on domestic spending to cushion the impact of our trade policies.
China’s economy is heavily dependent on exports, and that’s its weak spot. Strategically, we ought to exploit this vulnerability.
