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Global Trade At A Crossroads: U.S. Quadruples Down In China Dispute, Sparking Wider Fears Of An All-Out Trade War

(Editor's Note: This article supplements "Global Trade At A Crossroads: The 
Risk Of An All-Out China-U.S. Trade War Moves Up A Notch, " published June 18, 2018.)

NEW YORK (S&P Global Ratings) June 19, 2018--The Trump administration 
announced yesterday that the U.S. may impose tariffs on another $200 billion 
of unspecified Chinese imports--this on top of last week's announced $34 
billion--raising the stakes of a trade dispute with China even higher. This 
action draws the countries closer to an all-out trade war, in S&P Global 
Ratings' view. 

The U.S. and China have been going tit-for-tat, with each imposing 25% tariffs 
on $34 billion of imports from one another, and threatening to impose similar 
levies on another $16 billion of goods--for a total of $50 billion. The recent 
moves by the U.S. are generally aimed at industrial sectors that coincide with 
China's "Made in China 2025" policy, which lays out a strategy for the country 
to dominate high-tech industries, while China's include tariffs on farm goods, 
automobiles, and seafood products. This could have a significant effect on the 
U.S. farming sector because China is the largest destination for American 
agricultural exports.

In our article "Global Trade At A Crossroads: The Risk Of An All-Out 
China-U.S. Trade War Moves Up A Notch" published yesterday, we stated our 
belief that the potential near-term effects of these tariffs on corporate 
credit will likely be muted, and overall are unlikely to greatly affect either 
economy. We still believe that to be the case; however, the greater threat is 
that the dispute could expand beyond tariffs on goods. 

On June 18, President Trump instructed the Office of the U.S. Trade 
Representative to consider drawing up a further list of imports from China, 
amounting to $200 billion that could be subject to tariffs. China has 
threatened to retaliate but cannot match the U.S.'s $200 billion figure 
because its American imports totaled just $130 billion last year. 
Consequently, China may opt to pursue non-tariff actions that could affect 
services and investments.

China's Commerce Ministry released a statement warning that it may respond by 
"adopting comprehensive measures combining quantity and quality." While these 
measures are unclear, China could hit back by delaying American goods from 
entering the country or curbing American investment in the world's 
second-largest economy. This would only increase the risk that trade 
negotiations break down and the chance of policy missteps. We believe an 
all-out trade war would weigh heavily on consumer confidence, investment 
prospects, and growth beyond the short term.

RELATED RESEARCH
  • Global Trade At A Crossroads: The Risk Of An All-Out China-U.S. Trade War Moves Up A Notch, June 18, 2018
  • Economic Research: U.S. Biweekly Economic Roundup: Growth Is On The rise; Tariffs Are Not Too Far Behind, June 15, 2018
  • China's Major Wind Power Operators Can Absorb Tariff Cuts, June 4, 2018
  • Economic Research: Twin Deficits: Mind The Gap(s), May 18, 2018
  • Economic Research: Global Trade At A Crossroads: Will The U.S.-China Trade Tempest Make Landfall Or Blow Out To Sea?, May 4, 2018
  • In the firing line: Trump, trade and EU corporate credit, May 1, 2018
  • Global Trade At A Crossroads: How The U.S.-China Spat May Hurt The Tech Sector, And The Latest On Qualcomm And Broadcom, April 25, 2018
  • Global Trade At A Crossroads: As China Threatens Retaliatory Tariffs On U.S. Agricultural Products, Which Ratings Are Most At Risk?, April 6, 2018
  • Economic Research: U.S. Biweekly Economic Roundup: Jobs Hiccup In The Middle Of A Trade Spat, April 6, 2018
  • Global Trade At A Crossroads: U.S. Doubles Down In China Tariff Dispute, Worsening Credit Conditions, April 6, 2018
  • China-U.S. Tariff Dispute Turns Up A Notch, Raising Credit Risks, April 5, 2018
  • Economic Research: The U.S. Economic Outlook Is Solid, But Will Trade Tensions Have The U.S. Trading Places Soon?, March 28, 2018
  • Credit Conditions: North America March 2018--Trade Tensions, Market Swings Pose Risks To Benign Conditions, March 28, 2018
  • Global Trade At A Crossroads: If U.S. Tariffs Trigger A Trade War With China, Corporate Credit Will Suffer, March 23, 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 14, 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. 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

Only a rating committee may determine a rating action and this report does not 
constitute a rating action. 
S&P Global Ratings, part of S&P Global Inc. (NYSE: SPGI), is the world's 
leading provider of independent credit risk research. We publish more than a 
million credit ratings on debt issued by sovereign, municipal, corporate and 
financial sector entities. With over 1,400 credit analysts in 26 countries, 
and more than 150 years' experience of assessing credit risk, we offer a 
unique combination of global coverage and local insight. Our research and 
opinions about relative credit risk provide market participants with 
information that helps to support the growth of transparent, liquid debt 
markets worldwide.
Primary Credit Analysts:Terry E Chan, CFA, Melbourne (61) 3-9631-2174;
terry.chan@spglobal.com
David C Tesher, New York (1) 212-438-2618;
david.tesher@spglobal.com
Media Contact:April T Kabahar, New York (1) 212-438-7530;
april.kabahar@spglobal.com

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