Trump's Tariffs Could Turn US-China Trade War Into A Problem For All Of Asia: Sajjid Chinoy

As US President Donald Trump keeps the world guessing about the timing of his big move on China, concerns grow over the regional effects of the proposed punitive tariffs which could reach as high as 60%. 

According to JP Morgan’s Chief India Economist Sajjid Chinoy, these tariffs could spark a ripple effect, turning a bilateral trade war between the world’s two largest economies into a regional trade conflict in Asia.

Chinoy highlighted that what people fail to understand is that tariffs act as an “adverse supply shock,” leading to lower growth and higher inflation.

Coupled with Trump’s immigration policies—slowing the pace of immigration and increasing deportations—the effects could push the US supply curve inward, creating upward pressure on prices and weakening economic activity. 

If the tariffs are implemented, China, already grappling with excess industrial capacity and weak consumer sentiment, could see growth fall to as low as 2.5%. Chinoy explained that the Chinese government would likely respond with fiscal and monetary easing and by devaluing the yuan to counterbalance the impact of tariffs. 

“During the 2018 trade war, China’s Yuan depreciated by 13% as tariffs increased from 3% to 20%,” he said, suggesting a similar playbook could be expected this time.

However, these measures could send shockwaves across Asia. “More cheap Chinese exports will flood local markets, hurting domestic manufacturing,” the economist warned. While India’s limited export exposure to China—just 5%—offers some insulation, other Asian economies may face significant challenges, he said. 

Chinoy predicts a broader trade conflict, as countries impacted by an influx of Chinese goods may impose their own tariffs, escalating the situation into a regional trade war. Domestic manufacturing in several Asian economies could come under pressure as they struggle to compete with low-cost Chinese imports redirected from the US market.

For the US, Trump’s economic policies, including deregulation across sectors like oil, gas, and financial services, may boost corporate profits and drive near-term growth. However, Chinoy expressed concern about the looser fiscal policy underpinning these moves. “This worries me personally,” he said, pointing to an already precarious US fiscal dynamic marked by rising debt and large deficits. “Typical macroeconomic policy would argue for tightening fiscal policy and reducing fiscal deficits,” he added.

While these measures may bolster US equity markets by driving growth and earnings, Chinoy says the global impact is far from rosy. 

“If you're in the US, you might have a mixed reaction. Markets might welcome fiscal stimulus and deregulation. But for economies outside the US, the direct benefits are absent. Instead, they face the first-hand hit from tariffs and immigration restrictions,” he said.

This dynamic, he said, underscores the “schizophrenic reaction to the Trump economic agenda.”