Chart of the Week: China is important to Aussie investors. How will it fair with tariffs?
This week’s Chart comes from the China Economic Outlook report.
This week’s chart comes from Morningstar’s China Economic Outlook report.
The report takes a deep look into the current health of an economy that Australia’s prosperity is heavily reliant on.
Source: China Market Outlook report, Morningstar, and China National Bureau of Statistics, Peterson Institute for International Economics, Macrobond
As part of the report, our analysts look a look at the impact of tariffs on China. They believe that trade tensions are easing, but reescalation is a risk to Chinese equity prices. Find an excerpt of the analysis below, including the estimation for the impact of tariffs on China’s long-term potential GDP.
US-China trade tensions have been assuaged by talks held in London in early June 2025, where a framework trade agreement was hammered out. Specifics of the framework are yet to be released publicly and final approval by leaders in Washington and Beijing also remains outstanding. Still, commentary from US officials to media suggest that current tariff arrangements will remain in place under the agreement. Presently, average tariff rates on Chinese goods entering the US stand at an estimated 51% —significantly above their prevailing level prior to Trump’s “Liberation Day” in early April 2025.
Certainly, a ‘freer’ trade outcome from talks with the US would have been preferred by China. However, the long-term damage inflicted on the Chinese economy should prove relatively muted.
Indeed, economists estimate China’s long-term potential GDP will be around 1% lower than would have otherwise been the case, should US tariffs remain indefinitely at their present levels.
Still, renewed Chinese equity market weakness is likely if co-operation on trade breaks down again, with the Chinese stock market having recovered from its early April 2025 drawdown.
Legal impediments to Trump’s trade have mounted, with a US trade court recently blocking most of Trump’s tariffs on the basis that Trump had exceeded his Presidential powers in imposing them. For now, Trump’s April 2 tariffs remain in effect with a federal appeals court granting a stay order on the lower court’s ruling. Arguments in the appeal of this ruling are set to be heard on July 31, 2025.
Importantly, other legal routes remain at Trump’s disposal to levy tariffs on imports should the appeals court uphold the lower trade court’s prior ruling.
You’re able to find previous editions of Chart of the Week here.
