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Global Trade At A Crossroads: U.S. Doubles Down In China Tariff Dispute, Worsening Credit Conditions


This article supplements our "Global Trade At A Crossroads: China-U.S. Tariff 
Dispute Still A Skirmish, But Credit Risks Are Rising," published April 5, 
2018.

MELBOURNE (S&P Global Ratings) April 6, 2018--The U.S. announcement that it 
may impose tariffs on another $100 billion of unspecified Chinese imports 
further raises the stakes in the China-U.S. trade dispute. This action draws 
the countries even nearer to an all-out trade war, according to S&P Global 
Ratings.

We still hold the view that the potential near-term effects on corporate 
credit are likely to be muted. Admittedly, though, some industries could be 
more affected (see "Global Trade At A Crossroads: China-U.S. Tariff Dispute 
Still A Skirmish, But Credit Risks Are Rising," April 5, 2018, for details of 
these sectors). 

A greater threat is the dispute expanding beyond tariffs on goods. A breakdown 
in negotiations and policy missteps could spiral into a trade war, damaging 
global business and consumer confidence, investment prospects, and growth.

On April 5, 2018, the U.S. President instructed the Office of the U.S. Trade 
Representative (USTR) to consider whether tariffs on an additional $100 
billion on Chinese good imports would be appropriate under Section 301 of the 
Trade Act of 1974. The USTR has described China's proposal to impose tariffs 
on $50 billion of U.S. exports to China, including agricultural products, as 
unjustified. The total value of Chinese goods possibly subject to U.S. tariffs 
is now $150 billion. This is equivalent to a substantial 30% of the $505 
billion of China's exports to the U.S.

Overnight, China had initiated a World Trade Organization (WTO) dispute 
resolution procedure over U.S. tariffs on steel and aluminum. China's proposal 
to levy tariffs on $50 billion of U.S. goods represents 38% of the $130 
billion in U.S. exports to China. This leaves a further $80 billion of U.S. 
goods to China that are not covered by China's tariffs, yet. 


RELATED RESEARCH
  • Global Trade At A Crossroads: As China Threatens Retaliatory Tariffs On U.S. Agricultural Products, Which Ratings Are Most At Risk? April 6, 2018
  • Global Trade At A Crossroads: China-U.S. Tariff Dispute Still A Skirmish, But Credit Risks Are Rising, April 5, 2018
  • Economic Research: The U.S. Economic Outlook Is Solid, But Will Trade Tensions Have The U.S. Trading Places Soon?, March 29, 2018
  • Global Trade At A Crossroads: If U.S. Tariffs Trigger A Trade War With China, Corporate Credit Will Suffer, March 24, 2018
  • Economic Research: What Will Be The Likely Impact Of U.S. Steel And Aluminum Tariffs On Latin America?, March 20, 2018
  • S&P Global Economists Release A "Field Guide" To A Potential Sino-U.S. Trade War, March 19, 2018
  • Credit Trends: Global Bond Upgrade Potential: Will Trump Tariffs Affect The Metals, Mining, And Steel Sector's Lead In Upgrade Potential?, March 15, 2018
  • Credit FAQ: Japan's Top Steelmakers Can Withstand U.S. Tariffs And Increasingly Aggressive Investments, March 12, 2018
  • Global Trade At A Crossroads: U.S. States And Localities May Take Another Look At Budget Forecasts, March 9, 2018
  • Global Trade At A Crossroads: U.S. Steel And Aluminum Tariffs Raise Risk Of Retaliatory Spiral, March 9, 2018
  • Global Trade At A Crossroads: U.S. Steel And Aluminum Tariffs Will Likely Have Small Direct Impact But Risk Larger Knock-On Effects, March 9, 2018
  • Trump Tariffs Forge Better Credit Quality For U.S.-Based Steel And Aluminum Producers With A Protectionist Stance, March 2, 2018
  • De-Globalization Could Disrupt U.S. Supply Chains, May 30, 2017
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leading provider of independent credit risk research. We publish more than a 
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