US punitive tariffs will hit around 50 per cent of total Chinese exports to the US. Even though China will suffer some offset in export competitiveness, the significant depreciation of Chinese yuan against the dollar will provide an offset. The United States will begin the process of imposing 10 per cent tariffs on an additional 200 billion dollars of Chinese imports. The action is in response to China’s decision to impose retaliatory tariffs of $34 billion of US imports.

The Chinese export sector would be hit hard by the additional tariffs, particularly key industries such as textiles, metal products, auto parts, glass products and electrical and electronic equipment. The new US list of products subject to an additional ten per cent duty will impact a large range of Chinese textile products, including cotton and wool fabrics and yarns.

The US feels that its large bilateral merchandise trade deficit with China will help since China will run out of US products to impose retaliatory tariffs on long before the US runs out of Chinese products to apply punitive tariffs on. The US is China’s largest export market, accounting for 19 per cent of overall shipments. The wider damage of the US-China trade war will significantly increase the transmission effects to the rest of the Asia Pacific economies.