China will be unable to match the next round of US tariffs - Westpac

Sean Callow, Research Analyst at Westpac, points out that this week we saw the latest salvo, as China imposed 25% tariffs on $16bn of US energy and vehicle imports, justifying this as simply matching US measures.

Key Quotes

“China will be unable to match the next round of US tariffs, assuming it proceeds in the next month or two, because it doesn’t import a further $200bn of US goods. But as this week’s July trade data showed, China’s starting point is quite solid ahead of when any damage to China's export volumes is likely to occur, perhaps in Q4.”

“China’s surpluses are similar to 2011-2013, with the decline from huge surpluses in 2014-2016 due in large part simply to the rise in the prices of key commodity imports such as coal and crude oil (the latter notably exempted from this week’s tariffs).”

“But Chinese policymakers are clearly concerned about US trade policy, with reports of plans to support affected export industries directly.”