US-China trade tensions worsen

A new round of US trade tariffs on $16bn-worth of Chinese imports kicked in last week on goods including semi-conductors, chemicals and electric scooters. Beijing retaliated with levies on the same amount of American goods, including fuel and medical equipment. This is the second round of tit-for-tat measures and $50bn of imports on each side now face levies.

Trump insists he plans to impose taxes on over $500bn of Chinese goods unless Beijing agrees to major changes in its intellectual-property practices and industrial-subsidy programmes. China has denied Washington’s allegations that it systematically forces the unfair transfer of US technology and insists it adheres to World Trade Organisation rules.
Beijing has plenty of fiscal and monetary tools to keep the economy afloat, says Arthur Kroeber of Gavekal Research. The country’s property sector and consumer spending are holding up well. China “is well placed to outlast the US in an economic war of attrition”.
The US Federal Reserve has flagged a trade war as a risk to the US economy, says Shawn Donnan on Bloomberg, “but one that’s still over the horizon”. For now, Jerome Powell, chairman of the Fed, expects stronger growth. What’s more, Mexico and the US have agreed to refine the North American Free Trade Agreement. As Ben Levinsohn notes on Barron’s: “We’re never more than a tweet away from disaster on trade… but for now, there’s optimism.”

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