Trump's latest tariffs could drag China's growth to a 30-year low - but there's still 'no chance' it will agree to US demands

FILE PHOTO: China's President Xi Jinping waits ahead of their bilateral meeting with U.S. President Donald Trump  during the G20 leaders summit in Osaka, Japan, June 29, 2019. REUTERS/Kevin Lamarque/File PhotoFILE PHOTO: G20 leaders summit in OsakaReuters

  • China has consistently grown by more than 6% for the last 30 years, but Trump's latest tariffs could slow growth by up to 0.5 percentage points this year, according to a Bloomberg survey of 14 economists.
  • Tariffs "pose some challenges to China's exports and economy," the country's foreign ministry has said.
  • However, economists argue "there's no chance that President Xi will agree to US demands."
  • View Markets Insider's homepage for more stories.

The Trump administration's tariffs on China could drop the Asian superpower's economic growth to its lowest level in nearly 30 years.

The upcoming duties on $300 billion worth of Chinese goods could reduce growth by up to 0.5 percentage points this year, according to a Bloomberg survey of 14 economists. The lower bound of the Chinese government's annual growth target is 6%, and a Reuters poll in July forecast growth of 6.2% this year.

Some of the new tariffs are scheduled to take effect at the start of next month, while the rest are set to go live in mid-December.

The potential growth impact could play a role in trade negotiations between the US and China, according to Mark Williams, a senior Asian economist at Capital Economics.

"China's leaders have few good options, not because President Trump is winning, but because they realize that all sides in a trade war get hurt," Williams told Markets Insider in an email. "For example, responses like more tariffs on US goods or punitive sanctions against US firms in China could damage China by raising costs for Chinese firms and scaring off global businesses," he added.

China's best option might be to wait Trump out.

"The most likely response is that China's leaders hunker down in the knowledge that Trump won't around forever and in the meantime relieve some pressure on exporters by letting the renminbi weaken," Williams said.

Trump's latest tariffs aren't likely to make China budge either.

"There's no chance that President Xi will agree to US demands," Williams said. "That would be humiliating and, in any case, for an economy the size of China's, the loss of exports to the US is an irritation, not a mortal blow."

The Chinese government has warned that tariffs may dampen growth in the past, but it has struck a defiant tone, pledging to combat them and retaliate if necessary.

"The US moves will pose some challenges to China's exports and economy, but overall, the impact is controllable," Ministry of Commerce Spokesman Gao Feng said on Thursday, Bloomberg reported.

"China will be forced to retaliate if the US follows through with new tariffs," Gao added.

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