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BEIJING (REUTERS, BLOOMBERG) – July 6 is the day when the world's two largest economies should plunge deeper into a trade conflict that has shaken markets and clouded global growth prospects.
due to the imposition of duties on 34 billion US dollars of goods that it imports from China on Friday (July 6) in response to what President Donald Trump says is the theft of the American intellectual property. Additional rights of $ 16 billion could come later. Beijing said it would retaliate in the same way.
Trump has threatened to impose an additional $ 200 billion in tariffs if China retaliates, then an additional $ 200 billion in new counter-measures.
Here is an overview of potential economic damage in China and in other Asian economies most at risk: Singapore, Taiwan, Malaysia, South Korea, Malaysia, Hong Kong, among others.
Which products should be targeted?
US tariffs on Chinese exports will apply to engines and engines, construction and agricultural machinery, electrical, transport and telecommunications equipment and precision instruments. China's counter-tariffs will hit US agricultural products, automobiles and aquatic products. Soy is the country's largest import from the United States in terms of value.
The direct impact is limited
Rough estimates of economists show that every $ 100 billion in imports affected by tariffs reduces global trade by 0.5%, annihilating thus the growth of 0.1 point of GDP.
The direct impact on China's economic growth in 2018 is estimated at 0.1-0.3 percent while the drag on growth of its exports is expected to be 1 percent. The effect on the United States will be less, given the bilateral trade imbalance: China imported 130 billion US dollars of US goods last year, while the United States bought 506 billion US dollars US dollars from China, according to US data.
Global inflation is expected to rise 0.1-0.3 percentage points, regardless of currency volatility.
In China, what will be the economic impact?
A: Rates already have an effect. For example, Chinese companies are reselling US soybeans and Chinese companies are expected to cancel most of the other soybeans that they have pledged to buy in the United States during the year ending Aug. 31 once the additional rates come into effect
. According to Bloomberg Economics calculations, the United States and China are sticking to this series of tariffs – $ 50 billion in imports – and would not go further, then slow down the pace. 39, Chinese economy by 0.2 percentage point in 2019. If things get worse, the blow will be more important, reducing by half a percentage point growth. The Chinese economy grew by 6.9% in 2017 and the government has set a target of 6.5% for the current year.
On the domestic front, China's rich coastal provinces are the most dependent on exports. Guangdong, Shanghai, Zhejiang, Jiangsu and Fujian all have export-to-GDP ratios above the national average of 18.5 percent, according to Bloomberg Economics.
Meanwhile, these provinces have lower debt-to-GDP ratios, "The risk of a Sino-US trade war is worsening," said Chi Lo, senior senior economist BNP Paribas Asset Management in Hong Kong.
"Both parties may misjudge the intentions of the other when patriotism takes over rationality and push themselves into a series of attacks and retaliation."
Singapore, Malaysia, Taiwan, South Korea in Asia
] A DBS analysis shows that South Korea, Malaysia, Taiwan, and Singapore are the highest-risk economies in Asia on the basis of the United States. commercial opening and exposure to supply chains. South Korea could record a 0.4% drop in growth in 2018, Malaysia and Taiwan 0.6% and Singapore 0.8%. And the impact would be about double in 2019.
The OECD data – which break down the value added of Chinese exports by source country – show that Taiwan is the most exposed country in the world. 39, Asia with more than 8% of GDP, then come Malaysia with 6%, South Korea, Hong Kong and Singapore with 4-5%, the Philippines, Thailand and Vietnam about 3% and the US Australia, Japan and Indonesia about 2%.
There are other variations to consider. For example, the United States and China are Hong Kong's main economic partners, but their economy is dominated by services, which are not subject to tariffs. An economy like Vietnam, based on manufacturing, could feel more suffering.
For an interactive ranking of countries' participation rates in global value chains, click here: https://tmsnrt.rs/2tSO60I
But the indirect impact is considerable
Morgan Stanley estimates that world trade could be seriously disrupted as two-thirds of traded goods are linked to global value chains.
The Peterson Institute for International Economics shows that nearly two-thirds of US imports from China come from foreign-owned companies, another way in which US tariffs targeted on China have an impact beyond its borders .
flow, the capital probably came mainly from the United States, Japan and South Korea. Some analysts such as Singapore-based DBS say that the US economy could suffer more than China, that US levies could affect US companies with investments in the country and Washington is also involved in others commercial disputes.
Uncertainty on trade could make banks wary of their exposure to the affected industries and hurt the price and flow of credit. It could also make companies reluctant to invest. Any tariff repercussions on consumers could have an impact on domestic demand and consumer confidence.
The increased volatility of financial markets is detrimental to all of the above. A Pictet Asset Management model provides for a 10 percent tariff on US trade, which could tilt the global economy into stagflation and drive business profits down by 2.5 percent. the global scale.
Chinese equities have been hit hard in recent weeks, entering a bear market, as worries over the trade war have mixed with fears about how a debt control campaign will continue.
Markets fluctuated on Thursday as investors may be waiting to see how far the rates are actually applied.
"Any rebound in the market before the July 6 deadline would be only temporary, it is time to impose the additional 25% on Friday and what follows next," Central China strategist Zhang Gang said. Securities Holdings in Shanghai.
"The trade war is a constant asset for the markets and I do not see it being removed anytime soon."
The yuan slid Thursday despite the highest daily benchmark since October. The Chinese currency has had its worst quarter since 1994 in the three months since June, raising questions about whether the government was deliberately letting it slip into tactics in the trade war
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