Two weeks ago we asked "when will the US finally feel the pain from trade wars" and answered: as soon as the $200BN in "phase II" tariffs are implemented, which happened just after midnight on Monday at which point is is only a matter of time before rising prices catch up with ordinary Americans. Today, we reverse the query and ask a similar question for China, which unlike the US has already suffered substantially in its capital markets (and the slumping currency), if not so much where it really matters - at least according to Trump - its exports, the reason behind the US trade deficit.
In other words: When will the trade war affect China's exports?
Echoing the above observations, Deutsche Bank, which once again deconstructs the answer, notes that while the US-China trade war has caused "visible damage" to China's stocks, it seems to have had no impact on China's exports so far. But now that the US has announced a tariff on US$ 200bn of China's exports, when will the actual pain to exporters, corporates, and consumers start to be felt?
Well, according to DB's Zhang Zhiwei, the damage of the trade war has already shown up in disaggregate data. Specifically, after the US imposed a 25% tariff on $34bn of Chinese exports on July 6, US Customs data show that the imports of this group of goods dropped by 10% yoy in July. However, disaggregate data on this level is only available with a lag of about two months, which is why DB expects imports in August for this group of goods to drop further.
The flipside, of course, is that aggregate US imports from China were strong in July, because of interesting "front running" behavior as traders rushed to lock in deliveries, and prices, ahead of the next tariff round. The US government announced on June 15 that a 25% tariff would be imposed on another group of Chinese goods worth US $16bn, which came into effect on August 23. This caused a surge of imports for this group in July, up to 40% yoy, which in turn helped to offset the slump of imports for the US$ 34bn of goods already facing tariffs in July. Meanwhile, the headline trade data, which is the total US imports from China, remained strong at 8% yoy in July.
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