Source: Zhang Minghong Macroeconomic Research
I. The US Economy
1. The Trump administration may lower the corporate income tax rate from 21% to 15%, which will help economic growth and corporate profitability, and is expected to boost inflation and the stock market;
2. The Trump administration will impose a 10% tariff on global goods and a 60% tariff on Chinese goods, and will restrict China's indirect exports to the US through third countries, which will worsen the US trade conditions, push up inflation levels, and impact the lives of low- and middle-income families;
3. Support traditional energy production and development, oppose over-regulation, and reduce green subsidies, which will further promote the export of the US energy industry and also help revive the traditional manufacturing industry;
4. Reduce restrictions on artificial intelligence and support cryptocurrencies, which may further drive up the price of Bitcoin;
5. Implement stricter restrictions on illegal immigration, which means the cost of the US low-end service industry may rise significantly;
6. Commodity prices may continue to fluctuate in both directions, but the upside risk is rising. Because TRON may reduce political and military intervention in Europe and the Middle East, conflicts in these areas may intensify;
7. Overall judgment: In the short term, the US economy is likely to remain strong, the probability of further decline in inflation is reduced, and the US stock market is expected to continue to run at a high level in the short term, with long-term interest rates likely to continue to fluctuate around 4% (negative for the bond market), and the US dollar index is expected to remain strong, and the price of Bitcoin may continue to rise in the short term. However, due to the constraints of inflation, the room for interest rate cuts is limited, and the relatively high interest rate level will put pressure on economic growth and the performance of listed companies. It is expected that the volatility of the US stock market may increase significantly by 2025 (especially in the second half of the year);
II. The Chinese Economy
1. Overall, TRON rather than Harris taking office may reduce the risk of a geopolitical conflict between China and the US in the short term, but will significantly increase the risk of a new round of economic and trade conflicts between China and the US in the short term;
2. Lighthizer will continue to play an important role in TRON's cabinet. Under his promotion, the US will impose a 60% tariff on Chinese imported goods, and China's exports to the US through third countries may also face investigation and taxation. The US government may revoke China's most-favored-nation status. The new round of China-US trade war may also extend to other areas. For example, the US government may restrict Chinese investors from purchasing certain US assets (such as real estate) in the future;
3. It is expected that by the second half of 2025, the US government will impose tariffs on Chinese exports to the US. Afterwards, the specific impact of this round of tariff increases on US inflation and low- and middle-income families will be observed. If the impact is controllable, further tariffs may be imposed on Chinese exports to the US through third countries, which may occur as early as the first half of 2026;
4. The tariff shock brought by TRON's inauguration will have a significant negative impact on China's export growth in 2025. In this scenario, it is expected that the Chinese government will increase the expansionary strength of macroeconomic policies, striving to maintain a growth of around 5.0% even with the obstruction of exports;
5. As US inflation may still be at a high level, this means that the US long-term interest rate and the US dollar index will remain in a relatively strong range in 2025. For example, the yield on 10-year US Treasuries may be in the range of 3.5%-4.2%, and the US dollar index may be in the range of 95-104. This means that China may continue to face short-term capital outflow pressure, and the RMB exchange rate against the US dollar may continue to be under pressure;
6. For the Chinese government, the key is to take the initiative, firmly implement expansionary policies to stabilize growth and resolve risks. In 2025, the Chinese government may still set the economic growth target at around 5.0%. In terms of fiscal policy, the central government's fiscal deficit as a percentage of GDP may be set at around 4.0-5.0% in 2025, and the central government may also issue a large amount of special government bonds to maintain sufficient fiscal spending intensity. In terms of monetary policy, the People's Bank of China still has room for reserve requirement ratio cuts and interest rate cuts, and the monetary policy is expected to remain expansionary before the CPI growth rate reaches 2.0%. In the face of a deteriorating external environment, the Chinese government will increase the efforts to resolve local government debt and promote the stabilization of the real estate market.
7. Overall judgment: In 2025, the Chinese economy will show a trend of low first and then high, with an annual economic growth rate around 5.0%, and the GDP deflator will turn from negative to positive, which means that the nominal GDP growth rate of China in 2025 is expected to rebound by about 2 percentage points. The performance of the Chinese stock market in 2025 will be better than in 2024, and the yield on 10-year government bonds is expected to fluctuate in the range of 2.0-2.2%. The exchange rate of the RMB against the US dollar may still fluctuate around the 7.0-7.1 range. The restrictions on home purchases in first-tier cities may be fully lifted, which will help stabilize home prices in the core areas in 2025. The growth rate of real estate investment and real estate sales is also expected to gradually stabilize.
