Bloomberg reports China Trade Outlook Darkens as Trump Threatens Total Tariffs.

>Trade data for August released Saturday echoed both the cause and effect of the standoff with the U.S. -- the surplus with the U.S. rose to a record, while overall export growth slowed. A lone bright spot may be faster-than-expected import growth, signaling that domestic demand in the world’s second-largest economy is holding up for now.

>“With further large-scale U.S. tariff measures imminent, Chinese exporters will be hit hard and China’s GDP growth rate in 2019 is likely to be dented,” said Rajiv Biswas, Asia Pacific chief economist at IHS Markit in Singapore. “If the U.S. keeps ramping up its tariff measures against China, the export sector will face a long, hard road ahead despite government measures to mitigate the impact.”

>Hours before Trump’s Friday threats, China announced measures to support some of the exporters targeted by the barrage of higher duties. The Ministry of Finance said it will raise export rebate rates for 397 goods, ranging from lubricants to children’s books, meaning that firms shipping such products abroad will pay less value-added tax. The new rates will be effective from Sept. 15, the ministry said in a statement on its website.

Misleading Chart

I added the arrows to the Bloomberg Chart.

The chart is misleading because it compares on one scale absolute increases, but year-over-year percentages increases on another.

At first glance it appears as if China exports are declining. Rather, only the growth in exports is declining. That said, the US is bearing much of the brunt of it.

Trump Eyes Another $267 Billion In Tariffs

On Friday, I commented Trump Eyes Another $267 Billion in Tariffs (And He's Foolish Enough to Do It).


That $267 billion is in addition $200 billion in tariffs not yet scheduled.

Will It Work?

The short answer is no even though China does not import $467 in goods from the US. But it can penalize some products heavily.

It can also reduce export VATs as noted above.

Finally, tariffs are not on a tax on US consumers, they also serve to strengthen the US dollar hurting the very exporters Trump seeks to help.

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