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China Macro: Quick Take On Additional U.S. Tariff
Zerlina Zeng, CFA - Head of East Asia Corporates, CreditSights
Stephanie Sim - Analyst, North Asia Industrials, CreditSights
EXECUTIVE SUMMARY
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President Trump announced a 10% additional tariff on Chinese imports effective February 4, citing efforts to address fentanyl issues, with potential adjustments based on China’s response. The 10% tariff was less severe than anticipated and focused more on consumer goods compared to the 2018-2019 US-China trade tensions. China’s response to the US tariff announcement has been more subdued compared to previous trade conflicts, possibly to avoid escalation amid domestic challenges and due to the timing around the Chinese New Year.
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The situation remains uncertain, as potential retaliatory actions by China could include tariffs, export controls, and geopolitical interventions, which may affect global risk sentiment and Asian markets. The tariff could lead to a reduction in Chinease exports, a slight decrease in GDP growth, and downward pressure on CPI, aligning with current economic forecasts for 2025. Monetary policy is expected to focus on managing currency and liquidity, with moderate adjustments anticipated, while fiscal policies may be more expansionary but could face delays depending on trade negotiations.
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