US-China trade war again at the centre stage – Rabobank

On Friday, the US proceeded with USD34bn of 25% tariffs on Chinese exports with another USD16bn waiting in the wings, notes the research team at Rabobank.

Key Quotes

“Crucially, the document released by the White House announcing these made it abundantly clear that every item on the list was specifically targeted at Beijing’s “Made in China 2025” industrial policy to move as rapidly as possible up to the top of the value-added ladder.”

“For its part, China has made clear again that it will retaliate immediately and will aim to hit the US agricultural sector that is President Trump’s base: soybeans and sorghum, for example, are now to be hit, which will prove hugely disruptive to global agri markets.”

“Worse, Friday’s US announcement also made clear that if China retaliates then the US will once again up the ante.”

“Of course, we’ve been here before. Yet it does seem far less likely that this time we can walk back from the edge. The bipartisan US political support for taking on China is clearly evident; and just as obvious is China’s unwillingness to budge from its 2025 game plan.”

“Either markets are not pricing this all correctly, or everything we are repeatedly told about the damage that trade wars do is wrong. Which one is it? It looks like we might soon find out.”