US: Potential impact of trade measures to be small-scaled – Nordea Markets

According to Amy Yuan Zhuang, Research Analyst at Nordea Markets, the announced trade measures on China of the US administration are small-scaled and even if fully implemented, have trivial growth impacts on both countries.

Key Quotes

“The USD 60bn worth of imports from China accounts for only 2.6% of China’s total exports. Given this small magnitude, the Chinese authorities could easily replace the lost export demand with domestic investment and minimise net growth impact. Jobless workers can be transferred to the service sector, a trend that is already taking place.”

“Similarly, China’s counter tariffs of USD 3bn account for barely 0.2% of total US exports. So it will have unnoticeable effect on US GDP. US inflation is expected to rise as a result of the tariffs as many imported goods from China are not easily replaceable. But the impacts are still limited and not close to the doomsday scenario feared by the market.”

“The impacts will be bigger on companies and sectors. Here, we think China is in a better position than the US. According to a joint database by OECD and WTO (latest available data is 2014), 78% of Chinese exports to the US added value to non-Chinese entities. This share has likely improved since but foreigners still stand to lose if Chinese exports plunge. On the other hand, China will try to hit the sectors in the US with little foreign content, such as farming.”