27 Aug 2019

US-China trade tensions continue to simmer

The trade dispute between the US and China has escalated sharply over the last few days, with both the Chinese and the US announcing tit-for-tat tariff measures. 

The latest escalation occurred on Friday with the Chinese government announcing that it planned to add an additional 5-10% tariff on $75bn of US imports, as well as resuming the 25% tariff on US autos. President Trump’s response some hours later was to announce that the 25% tariff previously introduced on $250bn of Chinese imports would be ratcheted up to 30% and the 10% tariff on $300bn (around half of the $300bn has actually been delayed to the 15 Dec) of Chinese imports set to come into force next Monday (1 September) would be increased to 15%. 


In response, markets fell sharply on Friday evening, but witnessed a rebound on Monday following President Trump’s comments from the G7 Summit in Biarritz, which appear to have eased market concerns, at least for now. 


Anything possible

Effectively President Trump suggested that there was some desire from the Chinese to strike a deal. In particular, he referred to two calls from Chinese officials over the weekend to resume trade talks. When asked, Mr Trump also suggested that ‘anything was possible’ in regards to a delaying, the US’s planned implementation of tariff increases on the 1 September. 


Where the situation goes from here remains to be seen, but with just under a week before the latest set of tariffs, come into force the mention of possible talks leaves the door slightly ajar to some kind of delay in increased tariffs. However, as recent months have demonstrated, reaching any kind of lasting agreement will be difficult.  

 

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