How would a second Trump presidency impact China, according to Goldman Sachs' analysis?

• If Donald Trump wins the U.S. presidential election, his plans for 60% tariffs on Chinese goods could pose a "major downside growth risk" to China, according to Goldman Sachs.
• Despite economists' predictions, China's economy expanded by 4.7% in the second quarter compared to the same period last year, resulting in a 5% growth rate for the first half of the year.
• Some analysts believe that China is more likely to have favorable trade results under a Trump administration due to his transactional approach.

If Donald Trump wins the U.S. presidential election, his plans for 60% tariffs on Chinese goods could pose a "major downside growth risk" to China, according to Goldman Sachs.

The chances of Trump becoming the next president increased after surviving an assassination attempt and choosing JD Vance as his running mate.

Goldman Sachs' chief China economist, Hui Shan, stated on CNBC's "Squawk Box Asia" on Tuesday that currently, exports are a significant positive aspect of the Chinese economy, and policymakers should be prepared.

"Across major trading partners of China, tariff narratives are being observed, not just in the U.S.," she stated. "This will not sustain growth for China."

While the European Union was once China's largest regional trading partner, Southeast Asia has now surpassed them as China's largest regional trading partner. Trump, during his presidency in 2018, imposed duties on Chinese goods and has threatened to increase them to 60% if he is reelected this fall.

Since the first quarter of 2022, when Covid restrictions limited domestic economic activity, the contribution of goods exports to real GDP growth in China for the second quarter of this year has been the highest.

Despite Beijing's efforts to promote high-end manufacturing, the real estate market and weak consumption remain unresolved issues.

Officials from the U.S., including Treasury Secretary Janet Yellen, have stated that China's efforts to strengthen its industrial capabilities and technological independence have resulted in job losses in the U.S.

China the 'biggest threat'?

Since being chosen as Trump's running mate, Vance stated in his first interview that the war in Ukraine was not the main concern for the U.S., but rather China, which he considered the "real issue" and the "biggest threat."

The Biden campaign has criticized Trump's pick, stating that the selection was intentionally made "because Vance will comply with Trump's wishes and support his extreme MAGA agenda, even if it means breaking the law and causing harm to the American people."

On January 6, 2021, the U.S. Capitol was stormed by supporters of Trump, who were trying to overturn the 2020 presidential election results.

China's Foreign Ministry spokesperson Lin Jian stated on Tuesday that the country is always against using China as a topic in US elections.

Calls for stimulus

Despite economists' predictions, China's economy grew by 4.7% in the second quarter, resulting in a 5% growth rate for the first half of the year. This has prompted some to suggest additional stimulus to achieve the desired 5% growth for the full year.

The potential negative consequences of increased U.S. tariffs under Trump would mainly stem from heightened uncertainty and strained financial conditions, as well as pressure on the Chinese yuan, according to Goldman's Shan. She noted that in 2018, tariffs did not substantially affect China's exports to the U.S.

Despite recent data showing a slowdown in trade, China's exports to the U.S. increased by a modest 1.5% in the first half of the year.

Shan advised policymakers to prioritize domestic demand and focus on a more enduring and sustainable approach for a positive growth outlook, as stated on CNBC on Tuesday.

The imposition of 60% tariffs has significant implications for the macro economy, according to her.

The Third Plenum, a highly anticipated meeting of China's top leaders in Beijing this week, is expected to determine long-term economic policy goals. So far, China has held back on stimulus measures.

Beijing will not increase support for the economy due to weak retail sales and disappointing second-quarter growth, according to Citi analysts.

"Analysts suggested that policymakers may accept temporary weakness in the property sector during its structural shift. Additionally, concerns about trade and external relationships could allow China to preserve policy space for future actions."

Citi forecasts 5.0% growth in real GDP growth for China this year.

In the first six months of the year, the growth rate of China's U.S. dollar-denominated exports was 3.6%, driven by stronger-than-anticipated global demand for Chinese goods.

According to Tao Wang, head of Asia economics and chief China economist at UBS Investment Bank, manufacturing and infrastructure investment may remain strong, and exports should continue to grow at a decent rate in the third quarter. Additionally, there may be front-loading of shipment orders in the second half of the year due to concerns about higher tariffs.

Chinese authorities are unlikely to implement significant economic stimulus in the near future, as they may wish to conserve resources in the event of further economic downturns and increased tariffs.

UBS forecasts 4.9% growth for China's economy this year.

Trump the dealmaker

Some analysts believe that a possible Trump presidency will not harm China.

Ben Harburg of Corevalues Alpha stated on CNBC on July 4 that he believes China is more likely to have positive trade outcomes under a Trump presidency due to the ex-president's transactional nature.

Harburg stated that if Biden is reelected, continued tariffs and interference in Chinese domestic affairs will not positively impact China's economy or improve U.S.-China relations.

He stated that a Trump-China alliance would represent "a more definitive possibility of a favorable outcome for China."

CNBC's Sonia Heng contributed reporting from Singapore.