Tay: US May Impose Tariffs Targeting China's Activities in Third Countries

Maybank's Erica Tay stated that, given the uncertainties surrounding Trump's trade policies, customs tariffs targeting Chinese firms' operations in third countries cannot be overlooked. Reminding that Trump promised high tariffs on Chinese cars produced in Mexico, Tay noted that factories owned by China are primarily viewed as finishing hubs for products made in the mainland and appear particularly vulnerable.

She mentioned that insufficient evidence of local added value would serve as a red flag indicating that shipments are being redirected to circumvent tariffs. Tay stated, "It will be more challenging to justify higher tariffs solely because goods contain a significant amount of local added value and local labor when they are owned by China. Sectors like solar energy and electric vehicles are likely to be specifically targeted due to direct competition with U.S.-made products."

Tay expressed that China's export growth next year might be negatively impacted by the rekindled tensions, but also noted that the economy is more insulated from the U.S. than during Trump's last term. She expects Beijing's response to be pragmatic in order to minimize harm to domestic businesses. This could involve increasing financial and monetary incentives, establishing trade ties with regional economies, and encouraging manufacturers to expand overseas production bases.

Maybank maintains its GDP growth forecasts for China at 4.8% and 4.5% for 2024 and 2025, respectively, anticipating that stimulus measures will have a stabilizing effect.