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Analysts at Standard Chartered point out that the US has announced that it will extend punitive tariffs to a further USD 200bn of imports from China which will be imposed from 24 September at an initial rate of 10%, rising to 25% from 1 January 2019.

Key Quotes

“We expect China to quickly follow through with its plan to levy additional tariffs of 5-25% on USD 60bn of US products. This is in addition to the USD 50bn worth of US products on which China imposed additional 25% tariffs in July and August. This means that in total, higher tariffs are likely to affect USD 360bn of bilateral trade between the two countries.”

“The impact of higher US tariffs on China has been limited so far. As Figure 1 shows, China’s exports to the US grew around 12% y/y in July-August, similar to the pace in H1.”

“There could be a number of explanations for this. First, US demand has been very strong, reflecting an accelerating domestic economy. Our conversations with exporters in China confirm this. Second, the Chinese yuan (CNY) depreciated 9.5% against the USD from 11 April to 18 September, likely offsetting the impact of higher US tariffs to some degree. Third, there are indications that China-based exporters made advance shipments in anticipation of higher US tariffs. Finally, it is difficult for US.”

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