The US-China trade dispute deepened after China vowed to retaliate against President Donald Trump’s threatened tariffs on another $200 billion in Chinese imports. As a result, the benchmark index of Chinese stocks fell by more than 3 per cent, other Asian share markets declined and US equity futures traded lower, while yen, gold and Treasuries climbed.
The US, by targeting goods that are finished in China but whose components are often sourced from neighboring South Korea, Japan and Taiwan and more, is likely to hurt the economies of America’s allies too. If these tariffs are implemented, they would increase the market price of Chinese imported goods, dampening sentiments and inflating market pressures.
In case of Chinese exports to the US weakening due to these tariffs, the government would likely seek to offset the growth impact with a combination of subsidies to support domestic demand and higher infrastructure investment.
