US: Beginning of trade war? - Rabobank

US President Trump has let his trade hawks fly with 25% tariffs to be imposed on USD60bn of Chinese exports and Chinese investment restrictions into the US in response to allegations of intellectual property theft, points out the research team at Rabobank.

Key Quotes

“These tariffs will not be detailed for 15 days, with a further 30 days then allowed for a consultation period with US industry. However, the announced focus is on the aerospace, information and communication technology, and manufacturing sectors. All of these are high value-add and high-margin, exactly the areas China is targeting for future growth in its 2025 industrial strategy. Furthermore, when signing the executive order in front of the press Trump stated “This is the first of many.” Recall that these trade measures sit on top of the 25% steel and 10% aluminium tariffs already set to go into place today - and so far on China alone, with almost all US allies having apparently won at least a temporary exemption.”

“That may well alleviate the near-term risks of the most damaging global trade scenario, the US vs. the EU/everyone, but it remains to be seen if Trump will change his mind if US allies refuse to boost defence spending and confront China at the WTO or via tariffs, as he apparently wishes. Moreover, we still have the door wide open for the other very bad global trade scenario – US/everyone vs. China. Indeed, the US alone can deliver significant economic damage to China on the trade front should it so wish, as we explore in a special report here; and if everyone joins in, the pain would vastly greater.”