Tariffs Impact to China's Economy is Muted but Risk is Rising

Without the trade war, slowing activity in China as the country rebalances forecasts real GDP growth for China of 5.1% in 2018

Lorraine Tan 16 July, 2018 | 12:22AM
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Timeline of Escalating U.S.-China Trade War Actions - the Shanghai Composite Index Takes a Large Hit

Although the round of tariffs issued by the U.S. and by China on $50 billion of two-way trade imposed on July 6 will have only a muted overall economic impact on both countries, the tariffs signal that the risks of a full-blown trade war have increased markedly.

The latest news to impose 10% tariffs on a further $200 billion worth of goods imported from China to the U.S. demonstrates how keen the Trump administration is in getting some concessions from China, and which are likely to be focused on intellectual property protection. It is still unclear whether China will punch back aggressively given its potentially larger economic impact from a trade war loss, or whether it will seek to placate the U.S. by meeting its demands.

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Lorraine Tan  is Regional Director of Research, Equity Analysis, Morningstar