Context:
President Donald Trump announced a 10% tariff on Chinese imports due to take effect on March 4.
The linkage justified the move as being to do with drug flows from the North American neighbors into the territory of China.
Key Highlights:
- Response from China
- “All necessary measures” will be taken by the Ministry of Commerce against the legitimate rights and interests.
- It would take a tougher posture in responding, which means a greater risk of full-scale trade war.
- There was no advance discussion before the US announcement by the two countries.
Market Impact
- Chinese Stocks Tumble
- Hong Kong-listed Chinese shares plummeted to as low as 3.9% today, marking the biggest and most recent biggest single-day fall reaching this month as analysts blamed it on the trade dispute.
- The stocks on the onshore CSI 300 Index keep slides down 1.9%, the first weekly loss that has been recorded in a month.
Political & Economic Implications
- Timing & Strategic Considerations
- Tariffs are timed just prior to China’s National People’s Congress, at which time President Xi Jinping’s team would announce the details of the 2025 economic blueprint.
- Xi’s Politburo pledged to support domestic consumption and stabilize the housing and stock markets.
- There are tensions but both sides apparently do not agree a complete break in diplomatic relations.
High Level Diplomatic Engagements
- Chinese Vice Premier He Lifeng had met US Treasury Secretary Scott Bessent on the second occasion since Trump took office.
- The Defense Ministry of China confirmed it will hold consultation with the military of the United States.
With the US-China trade war hovering near rebound, market volatility is at its highest, and the channels of diplomatic engagement are at their narrowest. If at all Beijing were to shift its hitherto constraining approach to adroitness in counteraction, it would have deep ramifications, both at a global supply chain and perception economic levels.
Source: Business Standard
