US President Donald Trump has announced tariffs on $50 billion worth of imported goods from China, reversing a previous ceasefire in the trade war between the two countries – but it appears to be little more than a negotiating tactic, according to AMP Capital.
Overnight on Tuesday, the White House announced in a statement that President Trump had decided to move ahead with tariffs on China.
The US announced it “will impose a 25 per cent tariff on $50 billion of goods imported from China containing industrially significant technology”, with the final list of imports to be announced by 15 June and tariffs to kick in “shortly thereafter”.
Little over a week ago, China and the US had come to an agreement at the eleventh hour after “constructive” trade talks that seemed likely to halt the imposition of tariffs.
Speaking to InvestorDaily, AMP Capital chief economist Shane Oliver said the imposition of tariffs was President Trump’s attempt to “prod” and “put pressure on China” just days before commerce secretary Wilbur Ross arrives in the country for talks on the weekend.
“Ultimately it's to continue to put pressure on the Chinese to make it easier for Americans to export to the US and respect intellectual US property,” Mr Oliver said.
The White House statement claimed China engaged in “aggressive technology policies” relating to “forced technology transfer,” intellectual property theft and “outright cyber theft”.
Mr Oliver added, “I think he wants to see some commitment regarding tariffs, dates, firm changes to laws and some sort of commitment that over time the trade surplus will go down by a certain amount, and then some agreement as to how to keep check of all this.”
In 2017, the US ran a trade deficit with China to the tune of US$375 billion.
Tariffs imposed by the US onto China would affect Australia, too, insofar as Australia was connected to supply chain links between the two world superpowers, Mr Oliver said.
“That’s why you do see the Australian share market reacting to this, because we’re part of a supply chain supplying Chinese goods,” he explained.
But investors seemed to be “taking a more cautious approach to his announcements” and attempting to “look at it from a bigger picture”.
“Avoid overreacting to these developments,” he advised, pointing to the fact that this year looked to be more volatile.
“The trick for investors is to try turn down the noise on these developments. Just allow that the underlying economic situation globally is pretty solid.
“Overall, European growth is pretty solid and China looks pretty healthy, so look for the opportunities that these sorts of setbacks provide rather than panic every time there’s a new development out of the US or Europe.”
Indeed, if talks between Mr Ross and his Chinese counterpart went well, the tariffs could be delayed yet again, Mr Oliver noted.
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