China and the U.S. have significantly reduced tariffs for 90 days. Scholars and industry experts anticipate that both China and Hong Kong will first ship the goods previously accumulated due to the tariff war to the U.S., leading to an early shipping phenomenon similar to the beginning of the year, thus adding some momentum to the Sino-Hong Kong economic growth. Several investment banks have already raised their forecast for China's GDP this year to 4.7% or 4.8%, but it still doesn't meet the Chinese official target of 5%.
According to reports by Radio France Internationale, as Trump had already announced plans for substantial tariffs, Chinese companies had shipped their goods early at the beginning of the year, which led to a March export increase in China of 12.4% year-on-year, far surpassing market expectations. However, by April, exports plunged 21%. Industry analysis suggests that this 90-day 'truce' between China and the U.S. will once again trigger an early shipping scenario.
The situation is similar in Hong Kong. Hong Kong Baptist University Finance and Economics Associate Professor Mak Sui-Chee indicated that some Chinese goods in American supermarkets and appliance stores were already sold out, potentially leading to shortages in the coming weeks. Not replenishing could spur inflation. Additionally, to prevent Trump from changing his mind again, the industry will strive to expedite shipments to the U.S. within the temporary tariff pause to prepare for the Thanksgiving and Christmas shopping seasons, making the next 90 days a peak shipping period.
Commerce legislative councilor and Executive Council member Jeffrey Lam and Chairman of the Chinese General Chamber of Commerce Jonathan Choi noted that although tax reduction could bring relief to manufacturers, the current tariffs are still relatively high and unstable, necessitating efforts to actively explore emerging markets to diversify market risks.
Accelerated shipments by manufacturers will naturally drive economic growth. UBS estimates that after the tariff reduction, the total weighted average tariff rate on Chinese products by the U.S. is approximately 43.5%. Wang Tao, Chief China Economist and Head of Asia Economics Research at UBS, stated that although the impact of the Sino-U.S. trade war has diminished, the authorities' stimulus measures may also become mild, and uncertainty continues to affect business confidence and capital expenditure. It is estimated that China’s GDP growth may reach between 3.7% and 4% this year.
Song Lin, Chief Economist for Greater China at ING, analyzed that following the tax reduction, both countries could generally return to normal trade, potentially restoring business activities, which would benefit GDP growth in the 2nd and 3rd quarters. If the two countries reach a bilateral agreement within the 90 days, China's GDP growth this year could potentially be adjusted upward from the 4.7% forecast. JPMorgan is also more optimistic about China's economic growth. Their analysts' report states that the temporary tariff reduction was larger than expected, and as long as the new reduced tariffs remain unchanged, China's annual GDP growth rate could reach 4.8%, a significant 0.7% increase from prior estimates.