What's the Worst-Case Scenario for China if the Trade War Intensifies? – Forex News by FX Leaders

Just how bad could the trade war be for China? According to economists and analysts, if the trade war continues to escalate, it could lead to a crash in economic growth, a spike in debt and could even cause foreign companies to exit the Chinese markets.

Financial markets could see China’s growth fall below 6% for the first time in nearly three decades, to touch around 5.8%. Manufacturing companies could look for safer alternatives due to a hike in tariffs causing costs of goods to rise.

China’s debt, which is already close to 300% of output, could rise beyond the government’s control because of more tariff hikes. Analysts are comparing China’s situation with that of Japan where the government and the central bank had overstimulated the economy but have failed to curb slowing growth.

Manufacturers already suffering losses due to rising costs of raw materials and labor may not be able to handle loss of sales due to higher tariffs.

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