Importers and consumers in the U.S. face the heat of added trade tariffs
Though the tariffs seem to be wrecking the fortunes of importers, the idea behind it is to force China to bend to the U.S. will, as the tariffs would also mean lesser imports from China, affecting its economic growth - a line of reasoning that Jeffrey Gerrish, the deputy ambassador of the USTR and Kevin McAleenan, the commissioner of CBP, seem to hold.
However, there might be more to this than what meets the eye. The Chinese yuan has been plunging in value against the U.S. dollar over the last few months, shedding enough to trade at a 14-month low against the dollar now, partly due to the Turkish crisis this month. This fall in value would mean that China would have the cushion to take the blow of tariffs, as Chinese goods will become cheaper globally.
If trade war thickens in the following months, China could even think of voluntarily devaluing yuan, which could send shockwaves across South-East Asia, and possibly the U.S. as well. It is estimated that to absorb the potential 25% tariffs, the yuan would have to depreciate by around 12% and trade at around 7.2 per dollar.
AGL on its part has been helping its clients by advising them with the right strategy to approach the tariffs. “We have been running analytics on nearly every customer, to help them determine which of their products would be affected. We are keeping a close eye on decisions that are made, and assist them with the right tariffs, because it is important to be compliant,” said Fox.
As of now, the trade war has merely scraped the surface, as more extensive tariffs though in the pipeline, are probably never going to be implemented. A full-blown trade war would not just sink the economies of the U.S. and China, but would end up wreaking havoc on global trade.