International economy – US and China trade update
Trade wars continued to be a theme during the September 2018 quarter as tensions between the US and China escalated. In July, the US and China levied tariffs of 25% on $34 billion of each other’s exports.
This means consumers in the US and China now pay 25% more to buy tariff-affected products from each other.
In September 2018, the US imposed 10% tariffs on $200 billion of Chinese goods. China responded by imposing 10% tariffs on $60 billion of US goods. The US saidthat the current 10% tariffs imposed on China will become 25% tariffs by January 2019. China has promised to do the same.
These trade wars have reduced manufacturing activity around the world, apart from the US, since December 2017. Confidence across manufacturing has been affected by the uncertainty surrounding trade policy and this has translated intolower business investment.
To soften the blow of the trade war, the US and China have used government spending to assist those sections of the economy that have been affected.
The outlook does not appear optimistic as neither the US or China
The worst-case scenario for an escalating global trade war that spillsout beyond the US and China appearsto have been avoided.