13 May COTW: Share of GDP Exposed to U.S.-China Trade
Hopes for a trade deal are again fading on the heels of another weekend tweet-storm from the U.S. administration. “We are right where we want to be with China. Remember, they broke the deal with us & tried to renegotiate. We will be taking in Tens of Billions of Dollars in Tariffs from China. Buyers of product can make it themselves in the USA (ideal), or buy it from non-Tariffed countries… ” was the word from Trump’s twitter account, which has become the official wire for the most up-to-the-minute news on this topic. The tweets came after trade talks between the two countries ended last week without resolution, with the White House imposing a second round of duties on $200 billion of Chinese goods. Further, U.S. Trade Representative Lighthizer has said that President Trump has ordered the start of the process for raising tariffs on “essentially all remaining imports from China, which are valued at approximately $300 billion.”
The Trump Administration is behaving as if China has much more to lose in a trade war than it does. Markets appear to agree, at least for now, with U.S. stocks declining 2% last week while Chinese stocks dropped 6% (in U.S. dollar terms). Indeed, based on the most recent data we could find, the U.S. has one-third of the percentage of GDP exposed to U.S.-China trade (1.3% versus 3.9%) than does China.
The next key date on the calendar for this saga may be all the way out to the G20 summit in Japan at the end of June (over a month from now), but there will no doubt be lots of noise until then.
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