China’s trade routes threatened as American target
In July, the two major trading partners reached the trade deals with the US, possibly influenced China’s efforts to bypass the US tariff. The US imposed a 20% tariff on Vietnam and, more importantly, 40% levy on transmission. Additionally, Indonesia faces 19% tariff on shipment in the US.
Meanwhile, the US administration allegedly plans to implement the rules of origin for indirect shipment.
The ability to sweep the levy on new tariffs and transmission can adversely affect Chinese goods and the demand for a comprehensive economy.
While the July trade figures indicated a pickup in economic pace, tariffs are likely to be effective due to the possibility of change in terms of business.
Commenting on China’s trade approach for the second half of the year, Garcia Herrero said:
“Realing in the second half will be very difficult. So it is going to hit Chinese exports indirectly. Therefore, the second half is difficult and the government is preparing.”
Keeping in mind the challenges in the second half of the year, he hoped that export growth would be reduced by 2–3% year-on year in the third quarter and potentially 1% in Q4.
The US administration’s plan to target transmission may support Garcia Herro’s estimates.
CN Wire also commented on China’s growing dependence on third countries, stating:
“China has rapidly trusted the third countries-as for the manufacture of Vietnam and Mexico-final products or components, a trend that intensified the first US-China trade war and after increasing the restrictions. Through these countries, China’s share for US-bounded goods increased by 14% to 22% in 2017.”
Can China be ahead in Trump’s tariff agenda?
The July trade figures may attract the attention of US President Trump and his administration. The latest data shows that their efforts to reduce the demand for sugar goods are failing. The US can impose heavy tariffs as part of its rules of original policy and target China with more punitive levy.
On 6 August, President Trump doubled tariffs on India to 50% in response to continuous imports of Russian oil. China imports oil from Russia and Iran, which increases the risk of vengeance.
Market response: Mainlands recover from the initial dip
The July trade data increased the demand for the mainland China-list shares. CSI 300 and Shanghai Composite Index were 0.05% and 0.12% above the release of trade data, respectively, recovering from earlier damage. Meanwhile, the Hang Seng Index climbed up to the high session of the 25,060 season in response to the data from 24,908. At the time of writing, the Hang Seng index increased by 0.59% at 25,058.
