Why is "Trumpnomics" good for China's economy?
Trumpnomics, good for China's economy?
With the United States TV election debate and the shooting a few days ago, the probability of Trump winning the presidency is already very large, and at this time, his policies and views on the economy are very necessary, so there is the so-called "Trump economics".
And Trumpnomics, which is essentially low interest rates and low taxes, once wanted to reduce the United States corporate tax rate to 15% and raise tariff barriers, he agreed with interest rate cuts, but did not want to see interest rate cuts start in September.
However, even in the long run, Trump's attitude towards monetary policy is very dovish, which means that the Fed will cut interest rates more aggressively in the future, and he may consider replacing JPMorgan Chase CEO Jamie · Dimon as Fed chair, so as to carry out a more aggressive "big release".
Trumponomics, tax cuts, interest rate cuts.
So, why is Trump's rise to power good for China's economy? What are the Fed's latest rate cut expectations? How is China responding to this great change in United States? Today we will talk about these topics, code words are not easy, welcome to like, forward, collect.
Why is Trumpnomic good for China's economy?
Trump is actually very resistant to China, he believes that China's export trade has robbed the United States people of their jobs, so he believes that United States should raise tariffs, and in 2018 he took the initiative to launch a trade war with China, resulting in a setback in China's exports.
However, when it comes to monetary policy, Trump and Biden are completely different.
During Biden's tenure, the Fed has been raising interest rates, and even now it is still hovering between cutting interest rates and fighting inflation, but in Trump's view, the Fed should cut interest rates as soon as possible.
Biden's interest rate hike has triggered various problems in the United States economy.
Although Trump has not yet taken office, for Fed Chairman Powell, Biden has not been able to decide whether he will remain in office, but Trump has a more decisive voice, so whether Powell wants to curry favor with Trump has become a question for him to consider.
So what's actually going on? As the CPI data for June retreated, Powell's speech was more dovish, that is, the probability of interest rate cuts is increasing.
According to the latest market data, the United States will not cut interest rates in August, but the probability of a 25 basis point rate cut on September 19 is as high as 90.4%, and there is even a 9.4% probability of a 50 basis point cut.
The probability of a Fed rate cut in September has risen sharply, almost 100%.
This means that the possibility of a rate cut in November or December, which was previously expected by hawks, has been ruled out, and the United States rate cut event is rarely earlier, which is the most beneficial scenario for China's economy.
How to boost China's economy with interest rate cuts?
Why do interest rate cuts boost China's economy? To put it simply, the amount of money circulating in the world and in various countries is one of the most important factors influencing the growth rate of a country's economic development.
The reason why the world's economies have performed poorly in recent years is because the Federal Reserve has raised interest rates, and European and global central banks have raised interest rates, which has led to the global monetary tightening cycle and inhibited the flow of money around the world. So each of us has less money and purchasing power.
United States interest rate hikes have actually harvested the global economy.
However, in 2024, with the successful suppression of inflation by tightening monetary policy, European countries have begun to cut interest rates, and even the entire European Central Bank has made a decision to cut interest rates, which means that Europe's economy and people's purchasing power will begin to recover first.
Europe and China themselves have very close trade exchanges, and the recovery of Europe has led to an increase in demand for Chinese goods and more orders to China, so China's export data is also very good.
According to the data of the General Administration of Customs, the total import and export value of China's trade in goods in the first half of the year was 21.17 trillion yuan, a year-on-year increase of 6.1%, which is much better than the previous negative growth, and compared with the consumption and investment of the troika of the national economy, it is an important part of the economy.
Since the interest rate cut in Europe will be good for China's economy, the Fed's interest rate cut will actually be more beneficial to China's foreign trade data.
Why? Because the Fed's delay in cutting interest rates has actually seriously affected the recovery of China's economy.
For example, after the release of China's economic data in the first half of the year, we found that China's investment and consumption data were relatively poor, so many experts suggested that the central bank cut interest rates, and the reason why the central bank maintained a high strategic determination and insisted on not cutting interest rates was because of the domestic economic transformation, and the market itself did not need so much money.
On the other hand, if the Fed does not cut interest rates and China cuts interest rates, then the inversion of the interest rate gap between China and the United States will be exacerbated, and the interest rate of funds in United States will be much higher than China's interest rate. For example, now United States is 2% more than China, and if China cuts interest rates, then it will become 2.25%, or 2.5%, which will lead to capital outflows, which is not conducive to economic recovery.
U.S.-China interest rate differentials. It is currently around 1.9%.
For example, the stability of the RMB exchange rate, in fact, and whether the central bank cuts interest rates also has a great impact, if the United States does not cut interest rates, then China can only be forced to wait for the stability of the RMB exchange rate, otherwise, the economy here has not recovered, and the RMB exchange rate over there has collapsed, which is not conducive to the internationalization of the Chinese people's currency.
Therefore, it is not that China cannot cut interest rates at all, but we have to wait for the Fed to cut interest rates before we can cut interest rates, and the purpose is to ensure the stability of the RMB exchange rate.
By now you should understand that the low interest rate policy advocated by Trumpnomic is actually a policy of cutting interest rates, and this policy will directly adjust the market economic cycle and change the world from tight monetary policy to loose monetary policy. That's what we need.
The PBOC needs to maintain the stability of the RMB exchange rate
A resurgence of the US-China trade war? But it's actually a good thing overall.
Many people are also worried that the tariff sanctions on China after Trump takes office are actually predictable. According to Trump's previous statement, after he takes office, he will greatly increase tariffs on China, from the current 20% to 60%!
According to estimates, this will directly lead to a 2.1%-2.6% reduction in the growth rate of China's exports, which will seriously hit China's trade with the United States.
However, there are also some opportunities here, first of all, the tariff will not be raised so quickly, and the 60% tariff landing will generally be divided into several steps, because United States businessmen also need time to find alternatives to Chinese goods around the world, otherwise inflation in the United States will rise due to tariff problems.
Second, the reduction of China's direct exports to United States will prompt Chinese companies to strengthen trade with non-American regions, such as the Middle East, Africa, Russia, and so on.
The trade war will cause us trouble, but it will not hinder China's economic recovery!
As long as Trump implements his economics and keeps pushing down United States interest rates, the benefits for China's overall trade and economic recovery are actually greater than the negative impact of the 60% tariffs. Judging from the example, even the 18-year trade war has temporarily affected China's exports, and our foreign trade has still hit a new high.
That's why I say that Trumpnomics, the Fed's stimulus for interest rate cuts, is the fundamental reason why it's good for China's economy.
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【Sakura Wolf Finance】Explore the truth behind the hot spots, welcome to forward, like, and comment. The source of the picture comes from the Internet, invaded and deleted.