China tariffs 'to be lower' amid stronger bargaining power

Themis Qi and Reuters

The United States is projected to raise tariffs on Chinese goods in the second half of the year, but it would be less than expected as China is considered to have a stronger bargaining power now, according to Citigroup.

The tariff rates on China's exports, which were not mentioned by Trump on the first day of his presidency, may rise to 34 percent from the current 19 percent in the first phase - well below the 60 percent previously proposed, according to Pierre Lau Hin-tat, China equity strategist at Citi.

Lau expects the new levies to come in the second half of the year and drag China's growth of exports by 6 percent and the economy by 1 percent.

Trump not mentioning trade curbs on China indicates the stronger bargaining power of the world's second-largest economy, Lau added.

Christopher Hodge, chief US economist at Natixis Corporate & Investment Banking, believes Trump may plan to improve ties with China.

He said it is possible for Trump to have closer collaborations with China in his second term after the establishment of the Department of Government Efficiency, led by Elon Musk, who has a Tesla megafactory in Shanghai.

Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, said China is the most well-prepared country for the Trump administration because it faces the largest exposure.

Herrero added it is initially clear that China is the winner as Trump is considering visiting the country in his first 100 days in office.

But global trade flows will suffer from "interesting ructions" as the Trump administration settles in, Standard Chartered chief executive Bill Winters said in Davos yesterday.

themis.qi@singtaonewscorp.com