Trade war with US may kill 16 million jobs in China, warns Goldman Sachs

Retail, manufacturing, and coastal economies brace for impact as US-China trade tensions escalate

As US tariffs on Chinese goods continue to rise under Donald Trump’s administration, up to 16 million jobs in China, particularly in manufacturing for the retail and wholesale sectors, could be at risk, according to analysts at Goldman Sachs, as reported by South China Morning Post.

 

“If high US-China tariffs were to persist and Chinese exports were to fall precipitously, labour markets would surely feel the pressure,” Goldman Sachs said in a research report released on April 27. The bank also noted that nearly one-quarter of the threatened jobs are tied to wholesale and retail businesses.

 

The report further highlighted that communication equipment, apparel, and chemical products are among the most vulnerable exports due to their high dependency on the US market.

 

 

Trump’s tariff push hits hard

 

In an aggressive move to reduce trade deficits and revive US manufacturing, US President Donald Trump has raised tariffs on Chinese imports to a staggering 145 per cent, pushing the effective rate to approximately 156 per cent. Some Chinese products now face tariffs as high as 245 per cent, according to a fact sheet released by the White House.

 

In retaliation, Beijing has slapped tariffs of 125 per cent on US imports, adding to earlier duties in a tit-for-tat trade war that’s shaking global supply chains.

 

The US has also ended tariff exemptions for low-value shipments, directly affecting China’s retail and wholesale employment, Goldman Sachs said.  Also Read: Japan worries Trump's tariffs will push Asian nations towards China

Coastal provinces to bear the brunt

 

S&P Global Ratings has warned that China’s key coastal provinces, including Guangdong, Jiangsu, Shandong, Zhejiang, and Shanghai, will likely suffer the most. These regions are not only major exporters to the US but also account for about 40 per cent of China's GDP.

 

“Recent tariff hikes at their current levels could have a long-lasting impact on China’s regional economies that trade most actively with the US,” said Christopher Yip, credit analyst at S&P.

 

He added that the timing couldn't be worse, with local government debts rising due to a prolonged property downturn, large-scale infrastructure investments, and slow tax revenue growth.

 

The strain on local economies could also disrupt China's deleveraging efforts, putting additional pressure on financial stability.

 

Beijing vows economic support

 

In response to the mounting pressure, China’s 24-member Politburo, led by President Xi Jinping, has pledged to stabilise the economy and employment. Following a high-level meeting last week, the body called for targeted support for sectors and regions hit hardest by the tariffs.

 

Historically, Goldman Sachs noted, China’s central bank has cut policy rates in response to a weakening job market, a move that may be on the table again.

 

Re-routing strategy in play

 

To mitigate the impact, some Chinese manufacturers may shift production to third countries and export from there, Goldman Sachs observed. This strategy, known as “re-routing", could allow Chinese goods to bypass US tariffs—although Trump’s recently proposed “Liberation Day” tariff package aims to close many of these loopholes.

 

“Since most other countries are not subject to nearly as high tariffs as China, Chinese exporters may try to re-route goods through other countries,” the report stated.

 

Despite the challenges, China’s strong price competitiveness is expected to help sustain exports to other global markets.