In view of Bilal Hafeez, Research Analyst at Nomura, the US has launched a trade war against China and as admittedly, President Trump campaigned on “fair trade” and has over the decades argued that the US has been exploited by other countries.
Key Quotes
“The latest round in the trade war has been the announcement of 10% tariffs on an additional $200bn of imports from China. This comes on top of tariffs on $50bn of imports from China announced last Friday.”
“China has responded to the latest round with a threat of retaliation. The trouble is that the numbers are starting to matter. US tariffs on a total of $250bn of Chinese imports would come to 50% of total imports from China and would have to include many consumer products that only China produces. This would likely translate into higher inflation.”
“China cannot match one-for-one
- Meanwhile, China only imports $190bn of goods and services from the US, and so China would not be able to find the reciprocal $250bn worth of US imports to impose tariffs on.
- It is no wonder that China talked about taking “qualitative” as well as “quantitative” measures against the US. What these “qualitative” measures are is hard to gauge, but they could include restrictions on US visas, and US investment into China.
- And there is always the possibility of weakening CNY to offset some of tariffs. However, some of these could run counter to long-term Chinese goals of capital account liberalisation and the internationalisation of CNY.”
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