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Abu Dhabi, UAEFriday 20 July 2018

Trump's $50 Billion tariffs may accelerate Chinese tech development, economists say

Around 1,300 goods, especially tech-related are thought to be added to the list

Chinese tech company ZTE was recently the target of the Trump administration's sanctions. REUTERS/Jason Lee
Chinese tech company ZTE was recently the target of the Trump administration's sanctions. REUTERS/Jason Lee

US proposals to smack tariffs on $50 billion of Chinese imports are just the start, economists and China-watchers said as they await an impending announcement.

The Trump administration is preparing to release a refined list of Chinese products to be hit with tariffs that focus on technologies where China wants to establish itself as a leader, according to people familiar with the matter. The White House has said the duties will be implemented “shortly” after the release of Friday’s list, though no date has been set.

Here are some early reactions:

Tai Hui, JP Morgan Asset Management Inc.’s chief

market strategist for Asia Pacific in Hong Kong:

“Three rounds of negotiation with Beijing have failed to delay or prevent this outcome. The threshold to come to a consensus or a compromise seems high. Second, the implementation of tariffs on China is one of several fronts that the US is battling on the issue of trade right now.”

“Last week’s G7 Summit has reiterated the Trump administration’s tough stance on trade with Canada and Europe, with potential retaliatory measures from these two markets kicking in July.”

Alicia Garcia Herrero, chief Asia-Pacific

economist at Natixis SA in Hong Kong:

“The products included in the $50 billion package aim at containing China’s technological advance more than the bilateral trade deficit. We are in a tech arms race, which the US has started.”

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“From this perspective, the impact on China could, ironically, be positive as the US aggressiveness is only going to push China further in its race, accelerate acquisition and own development of technology to move up the ladder even faster than previously planned.”

“For some key sectors, like semiconductors, one important condition is needed, namely that China manages to acquire the technology elsewhere. Europe seems the most easily accessible market. Expect lots of M&A from China in key sectors."

Michael Every, head of financial markets

research for Rabobank Group in Hong Kong:

“What is China most sensitive to apart from Taiwan?: Made in China 2025. Can Xi bend to that threat? Can Trump back down with bipartisan support for these particular tariffs? This could escalate further and accelerate their economic momentum away from each other.”

Shane Oliver, head of investment strategy

at AMP Capital Investors Ltd. in Sydney:

“Implementation of the tariffs when it occurs could take us closer to a trade war. Ultimately a negotiated solution is likely -- and this is what both the US and China are aiming for. But the risks are high and the tariffs could well be implemented before the issue is resolved.”

“I suspect Trump also sees these announcements as a way of pressuring China into action on trade – so more classic Art of the Deal stuff.”