China: Retaliation is gentle - ING
|Iris Pang, economist at ING, suggests that according to their trade research, the retaliation from China is gentle as the increase in tariffs on US$60bn goods varies from 25% to 5%, which is less than half of the 15% (25% - 10%) increase in tariffs on US$200bn goods imposed by the US.
Key Quotes
“We believe that China refrains itself from being the one that escalates the trade war tension. Another reason is that moderate tariffs imply China is willing to continue the trade negotiations.”
“If the US retaliates by imposing 25% tariffs on all remaining Chinese goods (US$339.5bn, using data of US imports from China in 2018) then China might react more aggressively.”
“We always think that yuan depreciation is not the answer to boost exports. If there is a reduction of export orders from tariffs, a small depreciation of the yuan will not help exporters.”
“If the yuan depreciates further (USD/CNY spot 6.8817) in a short period of time it will fuel concerns of capital flight.”
“By the time President Xi and President Trump meet at the G20 summit in June the yuan should stabilise further. We maintain our USD/CNY forecast 6.75 by the end of 2Q19, though we don't rule out increased volatility in this pair in the run up to the G20 meeting.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.