Old Mutual Wealth fund research analyst Ernst Knacke explained that he thought that protectionism would affect China in the short term.
He explained that protectionist policies would create cyclical negatives which would affect both the Chinese and global economy significantly.
“A border adjustable tax would disrupt global supply chain and have a negative impact the Chinese base commodities market which contribute to products sold into the US,” he said.
“The net effect of this lack of supply would be inflation. The resulting increase in demand and slowdown in growth could cause global stagflation.”
Like NG, 7IM investment manager Tony Lawrence made the case that this increase in protectionism would not damage China significantly because the contribution exports make to GDP is negligible.
“China’s lesson from the global financial crisis was to reduce reliance on exports. It did this and altered its internal investment and consumption dynamics. That said, it is still the biggest low-cost producer with a number of the goods being base materials and so would be hurt a bit.”
