Temporary trade-war truce might be too late for China

Chinese police looking at a container ship © Getty Images
Chinese exports have proved resilient

The ceasefire in the trade war may come too late for China, says Natalie Lung on Bloomberg. Last week the US pledged to postpone a 15% increase in the tariff rate on $200bn of imports from China; in return China has suspended tariffs on US cars and car parts for three months. But according to Citigroup, the hiatus is not enough to iron out deep-seated differences between the two countries over intellectual property, cybertheft and state support for Chinese companies. So the hostilities are likely to resume, almost halving China’s export growth to 5.1% in 2019.

Not so fast, says Christopher Beddor on Breakingviews. Exports to the US have been surprisingly resilient so far. They grew by 10% last month. Many ascribe that to “front-loading” – US firms stocking up in advance of tariffs. Note, though, that according to Credit Suisse, orders from European importers, who wouldn’t need to front-load, have “not significantly deviated” from American customers. Nor can they discern a difference in demand between US customers who would be affected by tariffs and those who wouldn’t. Perhaps demand for Chinese exports is more robust than many fear.

It doesn’t really matter that much either way, according to Capital Economics. Say the postponed US tariffs do climb to 25%. This would only cut Chinese GDP by about 0.3%.”The impact on America would also be minimal.” Trade spats are bad news for intermediate suppliers, of course. Taiwan is especially exposed in this regard. But it still isn’t that big a deal. It would probably reduce the island’s GDP by 0.8%, while intermediate goods comprise about 0.5% of emerging Asia’s. For now, at least, too much fuss is being made about the trade war. Investors in Asia should be keeping an eye on global growth instead.