Home Relief on the US-China trade front could be short-lived – UOB
FXStreet News

Relief on the US-China trade front could be short-lived – UOB

Researchers at UOB Group assessed the recent announcements from the White House to delay tariffs on some Chinese products.

Key Quotes

“US President Trump sprung another surprise by delaying the 10% tariff on some of the US$300bn Chinese goods that were to become effective from 1 September. This was reportedly after a phone conversation between China Vice Premier Liu He and US Trade Representative Robert Lightizer and Treasury Secretary Steven Mnuchin on Tuesday (13 August)”.

“President Trump’s motivation for delaying some of the tariffs is largely driven by domestic consideration. According to President Trump, the delay is in order not to affect consumers ahead of Christmas shopping while we think that US will also want to contain the fallout from the trade tensions as it heads into election next year”.

“Despite the de-escalation in US-China trade tensions, a breakthrough does not appear to be forthcoming yet. The risk of full implementation of the 10% additional tariff on the US$300bn list of goods in December and even further increases in the tariff rate will remain if both parties are not able to resolve their differences through negotiation. At the current juncture, the progress is impeded by lack of consensus on key issues including compliance/enforcement of any agreement, structural issues such as intellectual property protection, technology transfer etc. The weakening Chinese currency is also another contentious issue after the US Treasury labeled China as a currency manipulator on 5 August”.

“Our base case scenario (60% probability) remains that of protracted trade negotiation leading to some eventual trade deal as both sides are still locked in discussion while we continue to see the probability of our Worst Case scenario of an all-out trade war at 30% given the expansion of the US’ tariff from 1 September”.

FX Street

FX Street

FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions.