China floats rate cuts, stimulus to counter Trump tariff hit

BEIJING – China said it has room to ease borrowing costs and reserve rules for lenders if needed to defend its economy against US President Donald Trump’s latest tariffs.

The reserve requirement ratio for financial institutions and the central bank’s policy rates can be cut anytime going forward, People’s Daily, the flagship newspaper of the Communist Party, said in a front-page commentary published on April 7. “There is still room for further expansion of the fiscal deficit, special treasury bonds and special debts.”

On April 4, President Xi Jinping’s government announced

it will impose a 34 per cent tariff on all imports from the US

starting April 10, matching the level of Mr Trump’s so-called reciprocal tariffs on Chinese products. The authorities in Beijing announced several countermeasures, including immediately restricting exports of seven types of rare earths.

The official Xinhua news agency said on April 5 that Beijing will continue to take “resolute measures” to safeguard its sovereignty, security and other interests.

US tariffs announced last week

will raise levies on nearly all Chinese products to at least 54 per cent, potentially crippling exports to the US just as China’s economy is steadying at the start of 2025.

The article in the People’s Daily suggested a swath of possible measures. 

“Extraordinary efforts will be made to boost domestic consumption, concrete and effective policy steps will be taken to firmly stabilise the capital market and restore market confidence, with relevant contingency actions to be rolled out in succession,” it said.

In addition, governments at all levels will provide measured assistance to severely impacted industries and businesses, according to the article. The authorities will support companies in adjusting their business strategies, and guide them to expand into domestic and non-American markets while striving to maintain trade with the US as much as possible.

The commentary acknowledged the tariff impact, saying that the new 34 per cent levy, together with the previously imposed US tariffs, “will significantly suppress bilateral trade”. China’s exports are set to face repercussions in the short term, creating more downward pressure on the economy, it said.

The Chinese-language article, however, indicated the US may be hurt more by the trade war as it “relies heavily” on China for a wide range of consumer goods as well as intermediate products. “In the short term, it would be extremely difficult to find alternative sources in the global market, and it is impossible for China-US trade to be completely severed.”

It also noted that Chinese leadership had already anticipated the implementation of a new round of economic and trade containment measures by the US and has fully estimated the potential impact it may cause and mapped out plans to respond.

“China has been engaged in a trade war with the US for eight years and has accumulated extensive experience in the fighting,” it added. BLOOMBERG