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According to Danske Bank analysts, the US-China trade war went from bad to worse to an unprecedented level on Friday with a tit-for-tat escalation of imposing tariffs from either side of the front.

Key Quotes

“On Friday afternoon, China announced countermeasures to Trump’s 10% tariffs on USD300bn of Chinese goods. Beijing will add 5-10% tariffs on USD75bn of US imports on 1 September and 15 December.”

“Trump responded violently. The president ‘ordered’ US companies to find an alternative to China, and said that he would respond to China’s tariffs in the afternoon (US time). After US markets closed, Trump announced that he would raise tariffs by 5% on all US imports from China, which amount to around USD550bn. The US will raise tariffs on USD250bn of Chinese imports to 30% from 25% on 1 October. The 10% tariffs on USD300bn of Chinese imports will be raised to 15% on 1 September and 15 December.”

“With the latest tit-for-tat escalation, it’s nearly impossible to say how the end game of the trade war will play out. Near term, we should watch out for: a) China’s response to Friday’s tariffs, b) China’s countermeasure to the blacklisting of Huawei and its affiliates, which Beijing says that it will announce soon, c) information about trade talks set to take place in September, and d) signs that China considers imposing restrictions on exports of rare earth metals. We expect that China will respond to the US’s blacklisting of Huawei and Friday’s tariffs.”