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Sonia Meskin, US Economist at Standard Chartered, notes that the US announced further possible tariffs of 10% on roughly USD 200bn worth of China imports on 10 July and coupled with the recent fiscal stimulus, they think the proposed tariffs are intended to give the administration room to up the ante on trade negotiations.

Key Quotes

“A major risk, however, is a potential sharp deterioration in business investment momentum due to trade-related uncertainty. This risk would increase if China retaliated against US services exports and state-specific US goods exports by limiting its investment in US financial assets or curtailing US company operations within China. However, our Asia economists do not believe these will be likely responses for now.”

“We expect trade tensions and any associated market volatility to continue throughout 2018 and beyond. Addressing the intellectual property (IP) and technology transfer issues is more salient to US economic interest than the bilateral goods trade deficit with China in the long run, in our view. However, these issues are also more intractable and difficult to rectify than the bilateral goods deficit. Combined with the upcoming mid-term elections, the scope and magnitude of the trade issues mean that the end game in the near term is hazy, at best.”