US-China trade relations cool, but remain elevated - AmpGFX

Greg Gibbs, Analyst at Amplifying Global FX Capital, explains that trade risks ratcheted down after recent meetings between senior officials of the US and Chinese governments put off the introduction of tariffs. 

Key Quotes

“Also, The US government reversed some of its actions against ZTE, allowing it to operate in the USA. Chinese regulators restarted their review of the Qualcomm bid for NXP Semiconductors.  And Chinese negotiators said they would encourage more imports from the USA.”

“However, the negotiations are far from over.  The USA administration is still heavily focussed on reducing its trade deficits, preventing US technology transfers to China, and reducing Chinese state support for its high tech industries.  Most see China as unwilling to compromise on what is thought to be a core mission to upgrade its tech sector.”

“The US Administration was looking into using the same national security laws it used to introduce steel and aluminium tariffs to raise tariffs on autos. The WSJ reported that Trump is looking to raise tariffs to 25% on auto and parts imports.”

“However, the implementation could take longer than ten months, according to a US government official, as basing tariffs on national security arguments require detailed studies.  It would be harder to establish a national security interest in producing autos than for steel and aluminium.  Nevertheless, just the threat of tariffs may encourage automakers to invest more in US production facilities.”

“In contrast two days earlier, China appeared to further ease trade tensions by cutting its tariffs on auto imports from 25% to 15%.”

“By looking to raise tariffs on autos at the same time as China is cutting theirs makes it appear that the US Administration is going beyond what is fair to support its own industry.”

“It appears to illustrate that Trump is willing to go to significant lengths to redress what he sees as long-lived and ingrained foreign policies to protect their industries.  It appears that the USA President wants to seek advantage for US industries and sees this as important for shoring up his political support and delivering on his election promises.”