The Sourcing Elite Board (SEB) is an exclusive, invitation-only club for top industry professionals, created by Global Sources. It currently has over 30 members in Shanghai, mostly senior executives and academically trained professionals in the sourcing sector. SEB periodically hosts internal events where members can discuss sourcing strategies, ecommerce innovations, and the global economic landscape. These activities aim to drive innovation, extend the leading edge of the industry, and provide a dynamic platform for sourcing experts to connect and share ideas.
Recently, Ms Guo Shan, invited to join the SEB forum, shared her insights in an interview with Chief Executive China on the changes and trends in global trade and China–US and China–Europe relations. She also discussed the impact of domestic economic stimulus policies and offered advice for Chinese companies expanding overseas.
Guo Shan is a partner at Hutong Research. With over 10 years of experience analyzing Chinese economic policy and providing consulting services to multinational corporations and financial institutions, she excels at integrating multidisciplinary expertise to help clients identify key changes beneath cyclical dynamics. From 2019 to 2023, she was a partner at Plenum China Research, focusing on industrial policies related to energy transition and structural changes in other areas of China such as housing and labor markets. Prior to joining Plenum, she worked at the Rhodium Group and Deloitte, gaining comprehensive insights into various fields, including Chinese economic reform, trade, investment, innovation, climate, and even antitrust and land issues. Ms Guo holds a bachelor's degree in Accounting and Finance from the Hong Kong Polytechnic University and a master's degree in Public Administration from Columbia University.
This interview was first published in Chinese in Chief Executive China in November 2024.
Chief Executive China (CEC): After the US announced interest rate cuts, how do you view the global trade situation in 2025?
Guo Shan: This issue is significantly influenced by the US election. Exports are relatively optimistic for the domestic market next year, but risks may increase afterward.
Firstly, the result of the US election is likely to be a decisive victory for Trump. Not only will he secure the presidency, but the Republican Party also dominates both the House and Senate, and the Supreme Court will have a Republican majority. The immediate outcome might be that Trump’s economic policies will be implemented more smoothly, indicating a high probability of the US entering a re-inflationary phase. The timing and extent of the US interest rate cuts have thus become one of the greatest uncertainties.
Re-inflation in the US is a likely event during Trump’s term, and the Federal Reserve may also be cautious about cutting rates. In this context, if the Fed cuts rates by 25 basis points in both November and December, the pace of cuts next year may slow down compared to expectations. Currently, we anticipate that the US will cut rates by about 90 basis points from now until June next year, with only 40 basis points of room for cuts in the first half of next year after a 50 basis point cut this year. There is also a possibility of further slowing the pace of cuts.
Originally, the market expected a 100 basis point cut; now it has dropped to 90. With high interest rates and inflation in the US, further slowing rate cuts could negatively impact the global trade situation. The WTO's report in October indicated that this year's trade growth rate is 2.7%, and next year's growth rate has been revised down from 3.3% to 3%, potentially further down. Whether next year's overall trade growth rate aligns with this year's level of 2.7% or is even lower will depend on the Fed's rate-cutting pace.
On the other hand, the relatively good news is that the slowdown in US rate cuts is due to strong domestic demand, and Trump's policies will stimulate US fiscal policy. Recently, US economic data has been very positive. If the economic data remains strong and demand is robust, the US might emerge as a highlight in international trade next year. Particularly, with a strong dollar, the depreciation of the renminbi against the dollar may stabilize China’s exports to the US before Trump fully realizes his tariff vision.
Chief Executive China: However, some say Trump will continue to pressure China on trade, which could adversely affect Chinese exports.
Guo Shan: Yes, but this is an issue to differentiate between the short term and the long term.
Now that Trump has just won, his first task will be to fill his cabinet with his people. By the end of this year, there will be a clear cabinet framework, and Trump will be inaugurated on January 20. After his inauguration, the Republican Senate is expected to quickly approve his appointments, followed by the new cabinet formulating policies, and then Trump will decide what policies to implement and how. In this scenario, tariffs may not have an immediate impact.
Moreover, one of the main factors in Trump’s victory was his economic policy. A key point of his economic policy is to reduce inflation in the US. If he were to immediately raise tariffs, it would spur US inflation, so the tariff policy may not be executed immediately. Alternatively, he may gradually implement tariffs to keep US inflation within a controllable range.
Secondly, Trump’s economic policy aims to attract manufacturing from other countries to invest in the US through tariff increases. We might see Trump imposing a 60% tariff and pressuring China through negotiations to encourage Chinese companies to invest in the US.
Considering these factors, we anticipate that tariff policies will not be immediately implemented. Of course, this expectation is set for mid-next year, and tariffs may gradually move forward in the second half of next year. Therefore, from now until the first half of next year, China has a competitive advantage in exports to the US.
As for the second half of next year, China has already made some arrangements regarding US import tariffs, including ecommerce, third-country transshipments, and establishing factories in third countries to ultimately enter the US market. In this context, the US will drive global demand, and China will merely adopt different methods to meet this demand, maintaining or even increasing its share of exports in global trade compared to Trump’s first term.
Thus, at this time next year, we believe the resilience of the US economy or the strong market demand will be beneficial for China’s trade exports.
Chief Executive China: However, Trump has also previously stated he would crack down on exports routed through third countries or set up factories to enter the US.
Guo Shan: First of all, he has indeed threatened that if China exports through Mexico to the US, he would impose a 100% tariff on Mexico. However, we must understand what Trump’s policy intent is. His statement is based on the belief that Chinese companies investing in Mexico to export to the US is less desirable than Chinese companies investing directly in the US. This is aimed at encouraging the repatriation of US manufacturing.
On the other hand, if he were to impose a 100% tariff on Mexico, he might also face resistance from Mexico. More likely, he would use this as leverage to pressure Mexico to cut off Chinese imports. However, that would require negotiations with each country individually; then, through the cabinet and Congress, a law would need to be enacted to prohibit any country doing business with China from exporting to the US. The prerequisites for that are numerous, requiring coordination of many interests, both foreign and domestic, making it unlikely for Trump to push such a policy quickly. Therefore, in this context, we remain relatively optimistic about exports next year, although risks may increase afterward.
Chief Executive China: After the US election, what changes might occur in China–US relations?
Guo Shan: There will be both positive and negative changes. Let’s first discuss the negative aspects.
We know that Trump does not particularly adhere to traditional political game rules or common logic, so we currently don’t know what actions he may take regarding China–US relations. This unpredictability actually signifies greater risks.
Compared to Biden’s term, although Biden has imposed more sanctions on China and has allied with other countries to amplify the impact of these sanctions, at least Biden’s policies operate within a certain logical framework that can gain the recognition of policymakers in other countries, facilitating smoother communication between the US and China, leading to a situation of conflict without breaking ties.
However, during Trump’s term, we do not know what kind of China policy he might adopt. The tariffs, investment policies, and tax reduction policies he has mentioned could easily not be fulfilled; at the same time, he could take completely unpredictable actions outside of these policies, escalating bilateral tensions. Thus, the unpredictability indeed entails higher risks, which is the first point.
Secondly, Trump’s second term may be worse than his first. He will be more experienced than during his first term, knowing better how to deal with China and understanding how to integrate the political and economic forces in the US. We have already seen that his collaboration with Musk is a very wise choice and has greatly contributed to his election victory.
Furthermore, although he has become more adept as a politician, Trump’s preferences in selecting people will remain. In his first term, as a political novice, the Republican establishment recommended its own faction to him, and his cabinet featured more establishment voices. These individuals followed traditional policy-making guidelines, even the more hawkish Lighthizer based trade policies on those established in the US-Japan trade context, making them predictable.
Now, when Trump selects personnel, he may prioritize loyalty. Those selected may appear very loyal to Trump, but they may lack consistency in China trade policies or may implement policies that are highly unconventional based on their own preferences. As long as these policies receive Trump’s personal endorsement, they could be enacted without any empirical theoretical justification.
In this scenario, the US policy towards China could become very chaotic, potentially surpassing the level of chaos seen in Trump’s first term. With no internal checks on Trump in the White House, this risk is indeed higher.
Chief Executive China: So they may engage in some rule-breaking actions.
Guo Shan: Yes. He is now more proficient at “not following the rules.” He understands that even if he doesn’t follow the rules, there will be no repercussions. The US system of “checks and balances” has already been circumvented, concentrating power in his hands.
Furthermore, this is Trump’s second term, and he will no longer face re-election pressures. With Musk’s support, he can operate freely in the next four years.
Chief Executive China: However, compared to China, Trump actually has many grievances to settle with the Democratic Party. Some hope that Trump will not prioritize targeting China.
Guo Shan: We agree on that.
From Trump’s campaign, it’s clear he has been focusing more on domestic issues. Foreign issues are actually secondary for him. This election also clearly showed that inflation significantly influenced US voters; if Trump wants to showcase achievements and establish his political legacy, he needs to make some changes.
However, this does not mean that foreign issues are unimportant. During the campaign, he mentioned China less, largely because the relationship with China is no longer a contentious topic between the two parties in the US. Maintaining a hawkish stance towards China is a consensus across both parties, with differences only regarding how to implement it and to what extent. Therefore, there is no need to play the “China card” to gain voters’ attention or support from other parties. As long as he wants to act, he can do so without facing opposition.
The hardline stance towards China under Trump may evolve into a gradually intensifying process, and some key officials he may appoint in his cabinet, such as Lighthizer, could return, and other anti-China figures like Rubio may also gain more prominent positions. Both of these individuals have been sanctioned by China. Appointing people sanctioned by China to significant government roles would undoubtedly complicate efforts to stabilize China–US relations.
Chief Executive China: Can I interpret this to mean that there may be a form of performative radicalism, where those who appear more radical are more likely to gain Trump’s support?
Guo Shan: Actually, that’s not quite the case. Performative radicalism was a feature of the first term; in the second term, those who have good relationships with Trump, especially those who remained loyal despite pressures over the past four years, will be more capable of advancing radical policies. Potential candidates for important positions now have strong ties to Trump and are very hawkish towards China. They are not subject to checks and balances from the Democrats or others, and thus do not need to perform.
In this situation, Trump himself may actually be the figure China needs to engage with. Compared to the hawkish stance of Trump’s loyalists towards China, Trump himself does not harbor significant hostility towards China; his attacks on China are performative, and he desires the return of manufacturing. Therefore, in this context, Trump may offer more negotiating space than the hawkish officials around him. However, Trump himself is already quite radical, so it’s hard to say that this is a good thing.
This is part 1 of 3 of the interview with Ms. Guo Shan.
Established in 2022 by Global Sources, the Sourcing Elite Board (SEB) is a collaborative initiative dedicated to advancing the sourcing industry through shared expertise and innovative strategies. Senior executives, from buying offices to retailers and brands, are welcome to join this distinguished community.
• The content of this interview reflects only the views of the interviewee and not necessarily those of Chief Executive China or Global Sources.
