After US President Donald Trump announced high tariffs, the world entered an unprecedented moment of chaos. Ray Dalio, founder of Bridgewater Associates, wrote that what is happening goes beyond tariffs. He stated that the far bigger, far more important thing to keep in mind is that we are seeing a classic breakdown of the major monetary, political and geopolitical orders, and this sort of breakdown occurs only about once in a lifetime.
The more immediate concern is the impact of tariffs on China’s real economy. A cross-border trade company in Shenzhen, which exports 100% of its products to US supermarkets, may see its existing orders slashed by half or more. Even companies not directly doing business with the US are seeing export orders dry up. Some Chinese companies are already preparing for even worse scenarios. Strategic reserves and domestic substitution are part of the response. On the other hand, the key is to deliver truly indispensable Chinese products. Diversifying markets is another strategy.
The tariff war initiated by the US has undoubtedly intensified the global economic recession expected in 2025, making domestic economic stability all the more critical. In response, China’s central government continues to send out positive signals. In these extraordinary times, the market is hoping for stronger policy support. In the long run, boosting domestic demand remains the key to reviving China’s economy in the face of the shocks caused by the tariff war.
