The tariff battle with the US will probably cost China 700 000 jobs, or more in the event of further escalation.
The job losses would come if the US imposes 25% tariffs on $200bn in Chinese exports and China retaliates by devaluing its currency by 5% and adding to levies on US goods, according to economists led by Haibin Zhu at JPMorgan Chase & Co. If China doesn’t retaliate at all, 3 million people could lose their jobs, they wrote in a research note on Tuesday.
The study highlights the more profound impacts of the tariff battle on the world’s second largest economy, which is grappling with a slowing pace of growth and a massive debt pile. Things may get even worse: if the US imposes 25% tariffs on all Chinese imports and China retaliates with the levies already announced, the measures will mean 5.5 million lost jobs and 1.3 percentage points cut off gross domestic product growth.
"If the US further escalates the tariff war, the impact on China will be larger," they wrote in the note. While the overall impact is still manageable, the rising unemployment could become a major policy concern, they wrote. "If unemployment increases sharply, it will change the policy reaction function and the risk is biased towards bolstered policy easing."