“I see about a 1% drop in revenue... most believe that after November a trade deal will be reached and trade will resume.”
China only exports about $500 billion/year to the US, out of a GDP of $12 trillion (4%), but there is some added supply chain activity on top of the export number.
Although it is not a big chunk of GDP, it is probably enough to cause a recession, if pulled out quickly. China is not used to real recessions.
Although it is not a big chunk of GDP, it is a much larger chunk of the Nation’s foreign currency earnings, which are used to shore up (manipulate) the Chinese stock markets and currency. There is significant secondary financial risk there, as well as from a debt bubble burst. If you subtract the exports to the USA, China currently runs a net trade deficit with the rest of the world (heavily dependent on imports of raw materials and energy).
What most believe in China, is quite heavily influenced by Government censorship and media manipulation, as well as what they might say, is influenced by self-censorship to stay out of trouble. An economic downturn will be politically damaging to Xi - both publicly and within the Party. He wants that downplayed, and he gets that downplayed.
Only a fraction of the potential (probable) tariffs are yet in effect, and there is a bow wave of pre-orders, trying to stock up before the heavier sanctions hit. That pre-ordering is borrowing from next quarter’s orders.
Currently, the total new tariff load is running around 5% of total export volume to the USA. January 1st, that goes up to around 12%. If President Trump goes ahead with the next round, that could possibly rise to 25% by Lunar New Year. The real effects have not occurred yet.
The next round of tariffs (on 50% of volume) might phase in like this one, 10% immediately, rising to 25% three months later (17% total at Chinese New Year, 25% total in May).
Outside of China, attitudes toward China have changed. No one thinks anymore that the communists will moderate, if incorporated into the global economy. Instead, they have only become increasingly aggressive militarily toward their neighbors, and more repressive to their own population, seeking to effectively crush or co-opt all religion in a five year plan, and have built gulags/re-education camps for a million Uighurs. Surveillance has become Orwellian. One man rule has effectively been reinstated.
Consensus has grown, that things can not continue as they were, with the communists and their cronies leading an effort to rapaciously consume global industries by hook or by crook; lying, cheating and stealing.
The end of the run is coming. Labor costs have risen significantly, and China is no longer the low cost producer based on labor. The cost of having all your intellectual property stolen, and bootleg products on the market within months, is now widely recognized. New money is seeking safer harbors. Graduating classes have peaked and are declining due to the one child policy. That will be a demographic drag on the economy for a couple of decades, at least. The banks are a house of cards, with the same assets being carried on three and four sets of books, with mountains of bad debt for ghost cities and zombie factories, that will never be re-paid.
Change is the only constant. Change is coming.
No one likes what I have to say. I get it. I understand it.
All I am trying to say is that China will not react like everyone else is forecasting. How has the rising middle class in Zambia, and Nambia factored into the equation? How about the new silk road with direct access to Russian urban areas? What about the infrastructure that is going up in Argentina and Brazil?
You cannot take a hamburger, remove the patty and still call it a hamburger. It’s something else.