China…..it’s your move

Following the tariffs imposed by the US on $50billion worth of Chinese goods back in July, President Trump has announced tariffs on a further $200billion of imports which will take effect next week.

Initially set at 10%, the tariffs are set to rise to 25% from 1 January next year, with the White House citing ongoing concerns over “unfair policies and practices” – including the theft of technology and forced transfer of intellectual property – as the driving forces behind its decision. Unlike previous tariffs that were aimed at businesses, these newest tariffs are set to impact the price of thousands of consumer goods.

As of 18th September, China is yet to respond, however, the President has warned that retaliation (in the form of the mooted tariffs on $60billion of imports from the US) will result in tariffs on a further $267billion of additional Chinese imports. Whilst China’s ministry of commerce said it “deeply regrets” the White House’s decision, Trump claims that it has offered China plenty of opportunities to halt what they deem to be unfair practices and China has failed to respond.

China’s frustration at the imposition of these imports is led by its plans to use its trade policy agreements as a core part of its future growth strategy. Meanwhile, Trump appears to be fulfilling his promise to put “America First” by using the tariffs as a vehicle to help create more US manufacturing jobs.

In terms of macro impact, this latest round of tariffs is not surprisingly going to slow down Chinese export growth to the US, however, these effects are likely to take time to come through and we could even see Chinese exports grow in the short term as US companies boost their imports ahead of the prospect of further tariffs coming into force.

Whilst Asian shares fell and US stock futures both took a small hit, analysts report that the effect on the market was not as acute as it could have been, since investors had been expecting such a move by President Trump.

China…..it’s over to you.

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Sources:
https://www.schroders.com/en/uk/tp/economics2/economics/trade-wars-step-up-more-to-come/
https://www.theguardian.com/us-news/2018/sep/17/donald-trump-united-states-threatens-to-impose-200bn-import-tariffs-on-china-in-trade-war

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