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At 12.01am US time USD34bn worth of 25% tariffs on Chinese goods went into effect and US President Trump also used the final few hours before this trade action began to underline that this was not the end of the issue, notes the research team at Rabobank.

Key Quotes

“Not only did he stress that a further USD16bn of tariffs will take place in around two weeks, but he alluded to the total value of Chinese exports that would see tariffs as rising to USD550bn, or ten times as much again.”

“Speaking to reporters, he stated directly: “34, and then you have another 16 in two weeks and then as you know we have 200 billion in abeyance and then after the 200 billion we have 300 billion in abeyance. Ok? So we have 50 plus 200 plus almost 300.” Previously it had been stated that there were USD200bn in 10% tariffs in abeyance and a further USD200bn after that, so a total of USD450bn. Now at  USD550bn that would mean that everything China sells to the US would be under a tariff of at least 10%. That’s not a trade spat: it’s a trade war.”

“China took the moral high ground here, and didn’t retaliate in advance – though it will now do so, the government stating: the  US is acting as a bully, hurting global value chains and hindering economic recovery; tariff hikes will cause market fluctuations and affect multi-nationals; China will help its companies with effective measures; continue its reform and opening up policy as well as protecting intellectual property rights; and uphold free trade and multilateralism.”

“However, that victim routine is unlikely to resonate globally given China’s well-known mercantilism: while nobody is cheering what the US is doing, very few –except perhaps the well-paid EU great-and-good listed earlier this week– are cheering China either.”