China Could Pay a High Price for Trump’s Tariffs

By putting more barriers in China’s path to U.S. markets and, in the process, risking some short-term damage to the domestic and global economies, President Donald Trump could exact a heavy long-term cost on the world’s second-largest economy. Indeed, he may even threaten China’s chances of eventually entering the ranks of high-income countries.

Chinese leaders have long known that they need to change their development model if they are to make this difficult transition, powering through the dreaded “ middle-income trap” that’s tripped up so many other developing countries. For two decades, they relied on global markets to provide a crucial tailwind while they pursued reforms at home. But this is changing now that the U.S. is increasing tariffs on Chinese imports and limiting their tech companies’ access to U.S. markets. Also, some U.S. companies have already begun to reorient their supply chains away from the mainland.