Trump's Tariffs Could Have 'Severe Consequences' For US Defense Sector, Beijing Adviser Warns

Amid rising tensions between the United States and China, a senior adviser from Beijing has issued a stark warning about the potential repercussions of President-elect Donald Trump‘s proposed tariffs on Chinese goods. The adviser highlighted the significant impact these tariffs could have on the U.S. economy, particularly the defense sector.

What Happened: Ding Yifan, a researcher at the State Council’s Development Research Center, cautioned that Trump’s plan to impose a 60% tariff could severely affect American manufacturers. This includes the defense industry, which relies heavily on affordable components from China, the Financial Times reported on Tuesday.

Ding stated that such tariffs could potentially reduce U.S. GDP growth by half. He also noted that Chinese suppliers might bypass these tariffs by rerouting products through other countries. His comments were made during a government-organized briefing for international media.

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He emphasized the crucial role of Chinese suppliers for U.S. military enterprises, warning that production could face significant disruptions without these supplies.

"If [U.S. leaders] really implement the policies for trade friction or a confrontation, it will have severe consequences," Ding said.

Additionally, Ding pointed out that American consumers have historically shouldered the cost of tariffs, citing studies from the Peterson Institute for International Economics. He suggested that while China could mitigate some impacts by shifting trade routes, the U.S. might face greater economic turmoil.

Why It Matters: The warning from Beijing comes as Chinese President Xi Jinping expressed China’s willingness to collaborate with the U.S. government to manage differences and expand cooperation. This statement was made during a meeting with President Joe Biden, emphasizing China’s readiness to work with any U.S. administration.

Meanwhile, tech investor Peter Thiel has predicted that Trump’s proposed tariffs would be detrimental to Chinese companies, though he believes the impact on American consumers would be “mildly negative.” Furthermore, Chinese tech giants like Alibaba Group BABA and ByteDance are expanding their presence in Silicon Valley, seeking to attract top U.S. talent in the AI sector amidst U.S. efforts to block progress.

Price Action: As per Benzinga Pro, defense stocks have risen over the past one year running up to the November presidential elections. In terms of year-to-date (YTD) returns, Lockheed Martin Corp LMT saw a 16.41% increase, while Northrop Grumman Corp NOC witnessed a 3.95% increase. Beleaguered company Boeing Co. BA was down by 42.85% due to its own trouble while Northrop Grumman Corp NOC was up by 3.95%.

Read Next:

• Xi Jinping Tells Joe Biden: China Is ‘Ready To Work With’ Trump As Tariff Threat Looms

Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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