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Trade War Likely to Escalate After G20 Side Meeting with Xi and Trump

October 30, 2018

Donald Trump and President Xi Xinping are expected to meet to discuss trade issues alongside the upcoming November 30 meeting of the G20. No one is optimistic about what could happen.

According to leaks reported simultaneously by multiple news organizations, three people connected with the White House say they U.S. is planning to place tariffs on all remaining Chinese goods imported to the United States in December.

There is an “if” to that. This only happens if Xi and Trump are not able to reach agreement on trade issues.

Most of those close to both sides of the discussion believe that with the meeting being only a month from now, the countries will remain far apart in their negotiations on trade issues.

Trump has warned before about placing tariffs on almost all remaining Chinese goods exported into the United States, if talks fail. The expectation is that these could be announced days after the G20 summit concludes.

That announcement would allow for a 60-day comment period which would conclude in early February. That is very close to China’s Lunar New Year. They would cover what last year would have amounted to $257 billion. The number may be up slightly from that.

The new tariffs would fall on top of the $200 billion in Chinese goods affected by Trump’s September announcements. Then those goods were hit with 10% tariffs. Those same $200 billion worth of goods will see their tariffs increase to 25% as of January 1, 2019, if nothing changes between the two countries.

In anticipation at least in part of the trade wars continuing, the U.S. stock market has dropped considerably in the past few weeks.

For China, the pressure to do something to resolve the situation has increased in yet another way. It Yuan has fallen badly over the last week as the U.S. dollar has moved upwards on international markets. The exchange rate, now at 6.9563 to the dollar as of October 30, is moving closer to an important psychological barrier of 7 to the dollar. While nothing has leaked on this yet, there is a lot of speculation as to whether the People’s Bank of China might do something to stabilize the currency. For now, it is just letting it slowly decline. If it were to begin a more rapid drop, the PBOC would likely intervene in some way.

Copyright: North America Procurement Council Inc., PBC