While the White House has been clear about where that will could go — $50 billion of tariffs already announced plus another $0 billion that will President Donald Trump threatened This kind of week — China has been a little less direct. Chinese officials have threatened tit-for-tat tariffs, nevertheless eventually could run out of items to target.
“In our view, the most likely outcome can be that will China responds in kind by introducing tariffs or additional import restrictions on US goods or services. This kind of could be calibrated to be proportional in response to the US action,” Goldman Sachs economists Alec Phillips along with Andrew Tilton said in a research note earlier This kind of year on the potential implications of a U.S.-China trade war.
The Goldman analysis set out an extra menu of options outside simple tariffs that will China could employ.
They include action against U.S. companies operating in China such as boycotts against Apple or Google parent Alphabet, currency devaluation, selling U.S. assets, Treasurys in particular, along with alterations on geopolitical issues, such as easing sanctions on North Korea.
Each poses certain obstacles — action against U.S. companies could run afoul of World Trade Organization rules, currency devaluation would certainly counteract ambitious measures the government has taken to stabilize the yuan, along with selling U.S. bonds or easing North Korean sanctions might not have much impact dollar-wise.
Indeed, on the latter points China has cut its Treasurys holdings 10.2 percent since the peak in late 2013 nevertheless still can be the global leader with $1.18 trillion on the books. Should China or others around the entire world continue to reduce their purchases of government debt, the U.S. can be hoping that will pension funds, insurance companies along with private investors step into the void.
One potential strategy, then, for the administration can be to simply wear China down in a “trade war of attrition,” as Peter Boockvar, chief investment officer at Bleakley Advisory Group, put that will.
The U.S. faces its own risks in such a scenario. Should the administration implement the full $250 billion that will threatened, that will would certainly be a tax on nearly half the $505 billion in goods the U.S. imported coming from China in 2017, according to Beacon Policy Advisors.
“We continue to have strong conviction that will Trump’s second round of tariffs can be all bark along with no bite,” Beacon said in its daily report.