2017年8月9日星期三

Trump to impose a tariff of 45% on China! What is the impact?

The Trump team is releasing news that the new US president may honor his campaign pledge to include China as a currency manipulator,But may not fulfill another promise: the Federal Reserve Chairman Janet Yelen pull down.

In a Bloomberg TV interview Friday, Trump's economic adviser Judy Shelton replied, "When he was asked whether Trump would really include China as a currency manipulator, he said, "He said, and Trump argued against currency manipulation by trade opponents.

Shelton also said that the Fed will remain independent in the future, he could not imagine why Yellen will not complete the current term. However, he revealed Trump's low interest rate on the Fed to maintain dissatisfaction, said Trump does not support the establishment of a low interest rate based on the "false economy."

Trump economic adviser Judy Shelton on Friday hinted that China will determine the exchange rate of the country, he also said Trump is a "say to do" people. Trump has pledged to declare China the currency manipulator on the first day of his presidency, threatening to impose a high tariff of 45% on Chinese imports. Once it is determined that there is exchange rate manipulation in a country, the United States will not only exert pressure on the government to adjust its exchange rate policy through the IMF, it is more likely to retaliate by means of trade. Trump after the election may exacerbate the outflow of capital in China, thereby increasing the pressure on the RMB depreciation in the medium term. 45% of the tariff!! At this time a lot of partners to panic. However, a careful analysis, even though the United States is China's largest export target, but China is actually on the US trade exposure is shrinking, according to Morgan Stanley estimates, even with 45% punitive tariffs, China's total exports Will only drop 13%. The United States accounted for 17 percent of China's total exports, up from 21 percent five years ago, but contributed 43 percent of China's trade surplus.


In the first nine months of 2016, China's exports to the United States were in the form of telecommunications equipment ($ 56 billion), office facilities ($ 47 billion), electronics ($ 33 ​​billion), clothing ($ 24 billion) ($ 16 billion). China's exports to the United States accounted for 39% of furniture exports, followed by metal ores and scrap metal (33%), footwear (33%), telecommunications and recording equipment (29%), Handbags (26%).


If the United States to raise tariffs on China Chinese exporters because of their profits are not high (5%), so the ability to absorb US tariffs to improve the impact of limited capacity. The increase in tariffs will be fully spread to the prices of Chinese exports. Suppose that US tariffs on China increased from the current 2.8% to 15%, 30% and 45% (see the Republican March debate: edition.cnn.com/2016/03/10/politics/republican-debate-tran-full China's exports to the United States will be more hit, will decline 21%, 46%, 72%; However, China's total exports in the medium term corresponding to the decline in the rate of much smaller, respectively, 4% 8%, 13%.


The United States a substantial increase in tariffs may not occur immediately Trump government to raise tariffs on the matter before the first communication with the domestic and foreign, Congress passed, but also through the domestic long judicial review. In addition, WTO is a series of mechanisms to resolve trade disputes, the United States as a WTO member should give priority to choose WTO to resolve trade disputes. So the United States is unlikely to really in the short term to China to implement a more tightening of trade policy. But if China's export growth falls drastically, a fall in trade surpluses will deter yuan demand, which could accelerate the devaluation of the renminbi, especially in the face of speculative sentiment and the effects of cross-infection. Of the bad big.

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