A quick recap on the trade war developments.
US announced the list of 1300 Chinese product lines included in the Section 301 tariff. Total of product value adds up to USD 50b. Products are broad based but technology related, centered around the “Made in China 2025” plan. Tariff rate is 25%. There is no implementation date yet. White house will seek public comment before finalizing, including hearing on May 15. And companies could file objections until May 22.
China announced retaliation tariffs on 106 US products. Total product values add up to USD 50b. Products include soybeans, autos, aircrafts etc, targeted at Trump’s and Republicans’ supporter base. Tariff rate is 25%. There is no implementation date yet. Vice Finance Minister Zhu Guangyao says there is room for negotiation and hoped there will be a resolution via WTO. There is no arrangement for public comments, no hearings whatever regarding the retaliation tariffs. And actually, no one expects such kind of democratic arrangements in China. That’s said, China is ready to fire any time.
To us, the most important message from today’s announcements is that China is adopting a hard stance on the issue, and they’re ready to fight, in calculated way. Firstly, the most obvious one was the arrangement of the Finance Ministry’s press conference. It’s held 30mins after Chinese stock market close. There will be two days of holidays ahead. And there are much room for sentiments to stabilize and progress be made before market opens again. Secondly, China’s action is rather targeted to Trump and Republicans. It’s drawing a clear line to the Americans that it’s not righting with all of them. Thirdly, the speed of the response showed that China is well prepared for it, politically too. And remember that Xi has just recently secured his political base by giving him the right to have unlimited terms as President of China. And, so far, has any one heard of opposition voice from China to warn the Chinese government not to enter into trade war? Probably not.
So now, the ball is in Trump’s court.
