China Economic Perspectives: Limited macro impact from the shift to Section 301 tariffs

Research evidence excerpt

China Economic Perspectives: Limited macro impact from the shift to Section 301 tariffs

ge tariff rate would hurt China’s headline export

growth by only around 0.1ppt on an annualized basis, implying marginal effects on GDP

growth and inflation. In other words, the near-term macro impact should be limited.

That said, given the notable sequential slowdown in domestic activity in 2Q and recent

equity market volatilities, we still expect the upcoming Politburo meeting to signal a

more meaningful shift toward policy support.

Expect broadly stable US-China relations

During President Trump’s visit to China in May, the two sides agreed to pursue a

“constructive and strategically stable” China–US relationship. This stability started from

the presidential meeting at the APEC Summit in South Korea in late 2025. After the May

visit, China stated the desire to maintain the broad stability “in the next 3 years and

beyond” (effectively the rest of the current US presidential term). There has been a

relative lack of major tensions which could change this. U.S. officials suggested that the

two sides were working toward a “$30bn-for-$30bn” tariff rollback mechanism, while

China’s MOFCOM was reportedly seeking comments from domestic corporates and

industry associations last week. As the latest tariff shift appears limited in macro impact

and largely technical in nature, we do not expect a strong escalation response from

China. The Ministry of Foreign Affairs reiterated that China opposes trade restrictions of

any kind, but its comments contained little new signal of retaliation. We therefore

expect US-China relations to remain broadly stable ahead of President Xi’s scheduled

visit to the US in September.

“Broad stability” doesn’t mean a lack of tensions between the two countries.