How bad is the trade war with China?
How bad is the trade war with China?
In New York, the trade dispute between the United States and China has worsened. On Tuesday, a new inch of 10 % came into force on all goods delivered from China in the USA, which led to the immediate reactions of China. As a retaliation measure, the Chinese government announced a customs of 15 % to certain goods from the United States, including certain types of coal, liquid gas and a 10 % customs in customs, agricultural machines and large cars. These tariffs should come into force on Monday.
China's reaction to the US tariffs
The Chinese Ministry of Commerce also included two American companies-the biotech company Illumina and the fashion retailer PVH Group, owner of Calvin Klein and Tommy Hilfiger-on the list of unreliable companies. This decision makes the business in China significantly more difficult for the two companies.
The course of Trump and Xi Jinping
There is the possibility that President Trump and XI Jinping at least agree to postpone these measures to lead further dialogue, similar to how the leaders of Mexico and Canada did before the US tariffs came into force. Clark Packard, research employee at the Cato Institute, commented: "If no similar deal comes about, the potential of becoming quite intense has." However, the prospects for such an agreement seem to be low, since Trump and XI did not exchange ideas on Tuesday. Trump told the reporters: "I don't have it in a hurry."
economic effects on the USA
The tariffs that Trump took to all Chinese products are partly related to China's alleged contribution to the delivery of fentanyl and other illegal drugs in the USA. This could lead to American consumers . This includes electronic items, toys and clothing - all of the USA from China's large imports of imports from China last year. Raw materials such as rubber, plastic and chemicals that American companies need to manufacture their products could also become more expensive.
The possible escalation of the trade war
The Morgan Stanley economists do not expect Trump to stop in Chinese goods for the additional 10 % tariffs because he had stated in the election campaign to introduce tariffs of up to 60 %. "We assume that the United States will raise further tariffs on China later this year to achieve its trade goals," they write in a message to customers. This could result in further retaliation measures on the part of China.
The consequences for the US economy
When Canada and Mexico react and insert a 10 % customs to all US goods and China raises a general custom of 5 %, the Citi economists predict that the US economy could shrink this year with an annual rate of 0.8 % and next year by 1.1 % if the tariffs remain. China's economy, on the other hand, could be less affected than the United States. However, Belgian and Canadian economies should expect far more serious setbacks.
summarizing thoughts
The risks from the tensions between the USA and China are already “significant,” said Nathan Sheets, chief economist at Citi. "Further significant increases in tariffs could disturb the supply chains and production, which would have negative effects on US employment and growth." However, the exact quantifiable impact of these developments remains difficult to determine, but should be noticeable in any case.
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