Trump’s Trade War May Spark a Chinese Debt Crisis
A tighter dollar will make the bursting of the credit bubble an inevitability.
China’s empty apartment towers are a testament to the country’s debt burden.
Photographer: Qilai Shen/Bloomberg
There’s no chance China will cut its trade surplus with the U.S. in response to President Donald Trump’s tariff threats. For starters, Washington has made no specific demand to which Beijing can respond. But its efforts may have an unexpected side effect: a debt crisis in China.
The 25 percent additional tariffs on exports of machinery and electronics looked, at first blush, like a stealth tax on offshoring. The focus on categories like semiconductors and nuclear components, in which U.S.-owned manufacturers in China are strong, recalled Trump’s 2016 promise to tax “any business that leaves our country.”