JAKARTA (TheInsiderStories) – United States (US) President Donald Trump announced an additional tariffs for around US$200 billion of imports products from China. The new tariffs will take effect on Sept. 24, 2018, and be set at a level of 10 percent until the end of the year.
“I directed the United States Trade Representative (USTR) to proceed with placing additional tariffs on roughly $200 billion of imports from China,” he said in a written statement released on Monday (17/08).
On Jan. 1, 2019, Trump added, the tariffs will rise to 25 percent. Further, he continued, if China takes retaliatory action against US’s farmers or other industries, Trump promised will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.
“We are taking this action today as a result of the Section 301 process that the USTR has been leading for more than 12 months. After a thorough study, the USTR concluded that China is engaged in numerous unfair policies and practices relating to US technology and intellectual property – such as forcing United States companies to transfer technology to Chinese counterparts,” said Trump.
For him, Chinese practices plainly constitute a grave threat to the long-term health and prosperity of the US economy. For months, Trump said, have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies.
Trump stated, “We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly.”
But, so far, he added, China has been unwilling to change its practices. To counter China’s unfair practices, on June 15, Trump announced that the US would impose tariffs of 25 percent on $50 billion worth of Chinese imports.
However, according to him, China still refuses to change its practices and recently imposed new tariffs in an effort to hurt the US economy.
“Once again, I urge China’s leaders to take swift action to end their country’s unfair trade practices. Hopefully, this trade situation will be resolved, in the end, by myself and President Xi (Jin Ping) of China, for whom I have great respect and affection,” he ended.
Moody’s Investors Service has warned US’s trade tensions with China are more likely to deteriorate this year and will dampen global growth in 2019, the agency says in its quarterly Global Macroeconomic Outlook update.
“We expect to see more restrictions on Chinese acquisitions of firms in the US and Europe, and our base case scenario now assumes that the US administration will go forward with some of the proposed restrictions on imports from China,” Elena Duggar, Chair of Moody’s Macroeconomic Board says.
Moody’s anticipates an implementation of further tariffs on US imports from China re expected to shave up to 0.3-0.5 percentage points from China’s real GDP growth in 2019. However, such measures will likely be met with moderate fiscal policy and liquidity easing measures in China designed to offset most of the effects.
For the US, the underlying economic momentum remains very strong, with the economy adding more than 200,000 jobs a month even with a historically low unemployment rate of 3.9 percent in July.
The credit rating agency estimates trade restrictions will trim off about one quarter of a percentage point from real GDP growth to 2.3 perent in 2019, offsetting some of the strong momentum attributable to the fiscal stimulus.
“Most of the impact of the trade restrictions on economic growth will be felt in 2019,” adds Madhavi Bokil, Moody’s Vice President and the lead author of the report.
For most G-20 economies, growth prospects remain solid and the near-term global outlook for many advanced economies is broadly resilient. G-20 countries are expected to grow 3.3 percent in 2018 and 3.1 percent in 2019.
The advanced economies will grow by 2.3 percent in 2018 and 2.0 percent in 2019, while G-20 emerging markets will remain the growth drivers, at 5.1 percent in both 2018 and 2019. However, overall there are early signs growth has peaked.
Many major emerging market countries have experienced a decline in economic activity owing to elevated oil prices, mounting trade tensions and tightening of financial conditions, while external headwinds additionally constrain others.
According to Moody’s, financial market volatility and reversals of capital flows away from emerging markets are to be expected amid tighter global financing conditions. Given the mix of weak macroeconomic fundamentals, loose monetary policy and economic dependence on foreign financing, it is not surprising that Argentina and Turkey have been under most stress.
A risk of wider disruptive contagion event engulfing other emerging market countries remains small, given relatively better fundamentals. Investors’ need for portfolio rebalancing has led to increased exchange market pressure in a number of countries.
In the case of Turkey, however, economic policies in particular have contributed to a worsening of its credit fundamentals, making its economy uniquely vulnerable.