China Weighs Early Stimulus to Cushion Economy Against Trump-Era Tariff Spike

China is reportedly preparing to roll out a front-loaded economic stimulus package in response to a sharp increase in U.S. tariffs, recently reintroduced by former President Donald Trump. The Biden-era trade policies had offered a degree of reprieve, but the Trump administration’s renewed 34% tariff on Chinese imports has significantly raised trade tensions. In response, Chinese officials are exploring aggressive domestic policy tools to stabilize the economy and avoid a deeper slowdown.

With average tariffs on Chinese goods now surging to nearly 70%, economists are warning of a potential 1 to 2 percentage point drop in China’s GDP growth this year. This pressure has prompted Chinese policymakers to act swiftly, aiming to safeguard consumer confidence and prevent capital outflows. As part of the strategy, Beijing is said to be considering an early injection of liquidity into the economy, including potential interest rate cuts by the People’s Bank of China and increased infrastructure investment.

Another key component of the Chinese response may involve expanding the national budget deficit to allow for more robust fiscal support. The government is also reportedly seeking ways to boost domestic consumption, which has lagged behind expectations, and to stabilize jittery financial markets. The Shanghai Composite and Hang Seng indices have already shown signs of stress, reflecting investor concerns about the impact of the growing trade dispute.

China’s own retaliatory measures include matching 34% tariffs on U.S. imports, but Beijing appears more focused on bolstering its internal economy rather than escalating the tariff battle further. By turning inward and accelerating stimulus plans, Chinese leaders hope to buffer key sectors and avoid deeper structural damage. Global markets and crypto investors alike are closely watching how this dynamic unfolds, particularly as rising economic volatility could spill over into digital assets and safe-haven demand.