Trump duties to decimate China profits, says Bloomberg Economics

Straits Times

20 hours ago

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Chinese textiles are among the industries most at risk from US President Donald Trump's sweeping tariffs.
HONG KONG – Most of China's industries cannot survive US President Donald Trump's tariffs at current levels, according to a new analysis by Bloomberg Economics.
Tariffs now set at roughly 40 per cent compare with average industrial profit margins of about 14.8 per cent in 2024.
That gap may prompt more intense price cuts, weakening profits, and – in the worst case – layoffs and potentially a wave of bankruptcies and closures, according to analysts Chang Shu, David Qu and Maeva Cousin.
Among industries most at risk are textiles, IT and communication equipment and furniture manufacturing.
Of 33 industrial sectors that analysts considered, only five have margins that are wider than tariff rates. They include pharmaceuticals, tobacco and oil and gas extraction.
'Some companies with a heavy dependence on the US market may not survive,' the analysts wrote in a research note.
'Others will scramble to adapt, accepting lower margins, laying off workers, cutting wages, and potentially flooding the domestic and other foreign markets with cut-price goods.'
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The findings underscore the economic risks that tariffs pose to the world's second-largest economy at a time when domestic consumption remains sluggish.
Trade officials continue to negotiate with their US counterparts on a bilateral deal to avoid another escalation in levies. Earlier in 2025, tariffs on China
soared to 145 per cent .
Data this week underscored the Asian giant's reliance on industrial production and exports to fuel growth.
While gross domestic product
advanced 5.2 per cent in the second quarter, outpacing analysts' estimates, it was helped by shipment frontloading and manufacturers cutting prices, both of which are tough to sustain.
Nearly half of China's industrial sectors rely on overseas markets to absorb 10 per cent or more of their output, the Bloomberg analysis found, and the US remains China's largest single-country trading partner.
Elevated tariffs could, in the long run, prompt companies in the US to source goods from other countries, the analysts wrote.
To be sure, there are factors that could cushion the blow to China's industry, including exports to other countries in which goods do not face the same trade barriers.
Some products may also be absorbed by domestic demand.
Some sectors have also cornered the global market, making it difficult or impossible for US firms to find needed items elsewhere.
China's government could also step in with additional fiscal support. BLOOMBERG