Trump wants to raise tariffs. How will China respond?
Summary: Shelton hinted on Friday that China will be designated as a currency manipulator, and Trump is a man who “walks the talk.” Trump promised to declare China a currency manipulator on his first day as president and threatened to impose a 45% high tariff on Chinese imports. Once Trump determines that a country has exchange rate manipulation, the United States will not only exert pressure on the country’s government to adjust its exchange rate policy through the IMF, but is more likely to retaliate through trade measures. tron
Key words:
Shelton Trump signaled on Friday that China would be designated a currency manipulator He is a person who “walks the talk”. Trump promised to declare China a currency manipulator on his first day as president and threatened to impose a 45% high tariff on Chinese imports.
Once Trump determines that a country has currency manipulation, The United States will not only exert pressure on the country’s government to adjust its exchange rate policy through the IMF, but is more likely to retaliate through trade measures. Trump’s election may intensify capital outflows from China, thereby increasing pressure for RMB depreciation in the medium term. 45% tariff! That’s okay! At this time, many friends panicked.
But a closer analysis shows that although the United States is China’s largest export target, China’s trade exposure to the United States is actually shrinking. According to Morgan Stanley’s calculations, even if it mentions 45 % punitive tariffs, China’s total exports will only drop by 13%. The United States’ share of China’s total exports has dropped from 21% five years ago to 17%, but it contributes 43% to China’s trade surplus.
Data chart
Statistics from January to September 2016 show that China’s largest exports to the United States were telecommunications equipment (USD 56 billion), office facilities (USD 47 billion), and electronic equipment (USD 33 billion). USD), clothing (USD 24 billion), furniture (USD 16 billion). China’s most dependent industry on the United States is furniture, with exports to the United States accounting for 39% of total furniture exports, followed by metal ores and scrap metal (33%), footwear (33%), telecommunications and recording equipment (29%), Handbags (26%).
The ability of U.S. tariffs to increase the impact is limited
If the United States raises tariffs on China, Chinese exporters have limited ability to absorb the impact of higher U.S. tariffs because their profits are not high (5%). The increase in tariffs will be fully passed on to the price of goods exported to China.
Assuming that the U.S. tariffs on China are raised from the current 2.8% to 15%, 30%, and 45%, China’s exports to the United States will be severely hit and will drop by 21% respectively. , 46%, and 72%; however, the corresponding declines in China’s total exports in the medium term are much smaller, 4%, 8%, and 13% respectively.
However, a substantial increase in tariffs by the United States may not happen immediately. Before raising tariffs, the Trump administration will first communicate with domestic and foreign parties on the matter. After the congressional bill is passed, it will also have to go through a long domestic process. Judicial review. In addition, the WTO has a series of mechanisms to resolve trade disputes. As a member of the WTO, the United States should give priority to the WTO to resolve trade disputes. Therefore, it is unlikely that the United States will actually implement tighter trade policies against China in the short term.
AAA
Shelton Trump signaled on Friday that China would be designated a currency manipulator He is a person who “walks the talk”. Trump promised to declare China a currency manipulator on his first day as president and threatened to impose a 45% high tariff on Chinese imports.
Once Trump determines that a country has currency manipulation, The United States will not only exert pressure on the country’s government to adjust its exchange rate policy through the IMF, but is more likely to retaliate through trade measures. Trump’s election may intensify capital outflows from China, thereby increasing pressure for RMB depreciation in the medium term. 45% tariff! That’s okay! At this time, many friends panicked.
But a closer analysis shows that although the United States is China’s largest export target, China’s trade exposure to the United States is actually shrinking. According to Morgan Stanley’s calculations, even if it mentions 45 % punitive tariffs, China’s total exports will only drop by 13%. The United States’ share of China’s total exports has dropped from 21% five years ago to 17%, but it contributes 43% to China’s trade surplus.
Data chart
Statistics from January to September 2016 show that China’s largest exports to the United States were telecommunications equipment (USD 56 billion), office facilities (USD 47 billion), and electronic equipment (USD 33 billion). USD), clothing (USD 24 billion), furniture (USD 16 billion). China’s most dependent industry on the United States is furniture, with exports to the United States accounting for 39% of total furniture exports, followed by metal ores and scrap metal (33%), footwear (33%), telecommunications and recording equipment (29%), Handbags (26%).
The ability of U.S. tariffs to increase the impact is limited
If the United States raises tariffs on China, Chinese exporters have limited ability to absorb the impact of higher U.S. tariffs because their profits are not high (5%). The increase in tariffs will be fully passed on to the price of goods exported to China.
Assuming that the U.S. tariffs on China are raised from the current 2.8% to 15%, 30%, and 45%, China’s exports to the United States will be severely hit and will drop by 21% respectively. , 46%, and 72%; however, the corresponding declines in China’s total exports in the medium term are much smaller, 4%, 8%, and 13% respectively.
However, a substantial increase in tariffs by the United States may not happen immediately. Before raising tariffs, the Trump administration will first communicate with domestic and foreign parties on the matter. After the congressional bill is passed, it will also have to go through a long domestic process. Judicial review. In addition, the WTO has a series of mechanisms to resolve trade disputes. As a member of the WTO, the United States should give priority to the WTO to resolve trade disputes. Therefore, it is unlikely that the United States will actually implement tighter trade policies against China in the short term.
AAA
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