3 Scenarios For The Upcoming $200 Billion US Tariffs On China

The US imposed tariffs on $50 billion worth of Chinese imports so far. China has retaliated with duties on the same scale. The mere talk of imposing levies has already caused some postponement in global investment decisions. The first round of tariffs that mostly came into force in early July already produced some front-loading of trade to Q2.

The upcoming tariffs on $200 billion worth of goods are a whole new ballgame. 

Significant trouble looming

The US, the world’s largest economy, imports around $500 billion worth of Chinese goods annually. Slapping tariffs on 10% of trade are entirely different from doing so on 40%. China, the world’s second-largest economy, imports much less American goods.

While it cannot match the $200 billion level in retaliatory duties, it has pledged to slap tariffs on $60 billion worth of US products and may also add non-tariff barriers and hurdles to US companies operating in the Middle Kingdom.

The US move and the response from China have consequences for companies in other countries as well, especially in Asia. Supply chains are distributed worldwide. A leap in trade hostilities could grind the growing global economy to a halt.

President Donald Trump has also threatened to go to the “full $500 billion“, meaning that after the upcoming duties, more may be in the pipeline.

The Administration is set to conclude its findings on September 6th and tariffs may be imposed as early as that date or on the following day, September 7th. Trump and Commerce Secretary Wilbur Ross both said that this is not the time to talk to China.

Sanguine markets so far

Markets have been relatively confident so far as the US and other economies continue posting robust rates of growth. This is unusual for markets that usually speculate on future developments rather than past ones.