(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
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