China's export drive to the United States is in full swing before tariffs kick in. Illustration: iStock

The trade war with the United States could cost China 700,000 jobs in the short-term and nearly three million if the conflict spirals out of control. Economists led by Haibin Zhu at JPMorgan Chase outlined the scenarios in a note.

Job losses would kick-in if US President Donald Trump wheels out 25% tariffs on Chinese imports worth another US$200 billion and Beijing retaliates by devaluing the yuan, or renminbi, by 5%, as well as slapping duties on US goods.

If China fails to take action, up to three million people could lose their jobs, JPMorgan revealed earlier this week, according to Bloomberg news agency.

The study highlighted the impact of tit-for-tat tariffs on China which is grappling with a cooling economy. Growth has slowed across a range of sectors while Beijing is struggling to contain ballooning local government and corporate debt.

Outlining various models, the multinational investment bank said in the worst-case scenario, 5.5 million jobs could be lost and 1.3 percentage points shaved off gross domestic product growth in the world’s second-largest economy.

“If the US further escalates the tariff war, the impact on China will be larger,” they wrote in the note, adding that this would include rising unemployment. “If unemployment increases sharply, it will change the policy reaction function and the risk is biased towards bolstered policy easing.”

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