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#1 17-05-2019 13:45:44

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From: Paris - France
Registered: 21-12-2009
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How much can Donald Trump's trade war affect growth in China?

How much can Donald Trump's trade war affect growth in China?

In an analysis published yesterday for their clients, Standard Chartered analysts point out that trade negotiations between the United States and China suffered a serious setback after the United States decided to increase customs duties on Chinese imports by 10% to 25% to $200 billion as of June 1:

"On May 13, China announced a plan of "forced retaliation" to increase tariffs on U.S. imports by $60 billion, from 5% to 10% to 25% depending on the product, also effective June 1.

Given the determination of both countries to continue trade negotiations, an agreement remains possible at the G20 summit in Japan on June 28-29. However, the increased risk of a breakdown in trade negotiations does not seem to be fully taken into account by the markets.

The United States also plans to impose 25% customs duties on the remaining $300 billion of imports from China. This could lead to a decline in China's annual exports to the United States of up to 40% over one year.

Given that trade with the United States represents 3% of China's GDP, we estimate that this would reduce China's GDP growth by 1.2 percentage points. The manufacture of furniture, computer, electronic and optical products and textiles would probably be the most affected sectors.

We believe that China can still achieve its GDP growth target of 6 to 6.5% for 2019, even if 25% tariffs are applied to all of its exports. China's proactive tax policy for 2019 was designed to prepare for possible setbacks in trade negotiations between the United States and China.

If economic conditions deteriorate more than expected, Beijing could take further easing measures, such as subsidising retail sales, reducing housing market tightening measures or lowering benchmark interest rates (not our base case). The depreciation of the Chinese yuan (CNY) is unlikely to serve as a stimulus tool as it could turn around and destabilise domestic financial markets."

"Anything worth having is worth going for - all the way." - J.R. Ewing



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