Published: Mon, July 23, 2018
Markets | By Josh Butler

Impact of U.S-China trade tariffs on US companies

Impact of U.S-China trade tariffs on US companies

Trump had earlier threatened to target up to $550 billion in Chinese products - a figure that exceeds the $524 billion in goods and services China actually shipped to the United States previous year. But his remarks to CNBC caught financial markets by surprise Friday.

The slide comes amid a deepening U.S. "We've had a trade war that's been going on for awhile, and now we're starting to hear talk about 'you shouldn't be doing that with your currency".

The dollar index meanwhile languished at two-week lows after U.S. President Trump criticised the Federal Reserve's tightening policy and accused the European Union and China of manipulating their currencies.

US President Donald Trump has indicated that he is willing to hit every product imported from China with tariffs. More than 70 percent of Republican and Republican-leaning USA adults believe increased tariffs between the United States and its trading partners will be good for the country, according to a Pew Research Center survey released late Thursday.

Last week, the Trump administration also identified a further $200bn in Chinese goods it may target for tariffs, for a total of $250bn. That sparked a dollar-for-dollar response from Beijing.

Beijing is targeting, in particular, sectors like American agriculture that could harm Trump politically at home. But in the CNBC interview, the president said he was seeking to do only what's fair.

President Trump took to Twitter on Friday to defend his trade policies, saying that currency manipulation from other countries and previous bad trade deals caused losses that the U.S. is entitled to recapture.

Noting that "deficits are not products of ill-intention, nor are they necessarily bad for an economy", he added that China has never deliberately sought a trade surplus with the US.

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For more than a month, China seemed to be enjoying the advantage of exchange-rate depreciation without the global backlash and panicky capital outflows that accompanied the bout of yuan weakening in 2015.

The threat to place tariffs on all Chinese goods sent to the United States would effectively end the tit-for-tat trade battle between the two nations, as Chinese imports from the U.S. are a comparatively small $129.9 billion.

To help differentiate this large group, we are most cautious on those where currencies are trading above their long-term average, equities look expensive, bond risk premia is low and indicators of positioning suggest room for further currency weakness. There is already pushback in the US from businesses that will take a hit in an escalating trade war.

USA stocks are little changed Friday as traders shrug off the latest trade threats from President Donald Trump and focus on company earnings reports, which contained some better-than-expected results from big names including Microsoft. Opponents of the new trade restrictions lined up to vent as the Commerce Department held a hearing on whether auto imports pose a threat to USA national security.

The US has since threatened tariffs on another US$200 billion in Chinese exports, prompting Beijing to vow retaliation.

"Automobiles - that's the 800-pound gorilla", Brookings' Dollar said.

Mr Trump complained that the United States was "being taken advantage of" on a number of fronts, including trade and monetary policy.

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