Moody's Analytics: Trump's Tariff Statements May Signal Beginning of Further Measures

Foreks - Moody's Analytics economist Harry Murphy Cruise stated that Trump's plan to impose a 10% tariff on China's exports, while lower than previous campaign promises, could be the beginning of more significant measures. Cruise emphasized that the association of the tariff with illegal fentanyl shipments underscores Trump's transactional approach and could potentially be used as justification for additional tariffs in other disputes. According to Nomura analysts, the timing of Trump's tariff announcement was somewhat surprising, as he had just appointed cabinet members, indicating he is ready to move quickly on trade restrictions against China. Analysts believe that tariffs could be implemented sooner than expected, shortly after Trump takes office in January. There is ongoing debate about whether Trump's comments imply a 10% additional tariff on all Chinese imports or just an additional 10% on goods that are already subject to tariffs. Nomura suggests that the latter could indicate an adjustment of the USD/CNH above the 7.4 level. The PBOC has not yet allowed a sharp rise in the USD/CNY, but the effectiveness of CNY fixing to manage depreciation is limited. Since nothing has been implemented yet, China's response could generally be one of retaliation if measures are enacted. Peter Jolly, former head of economic research at National Australia Bank, noted that "Trump's announcement today shows that free trade agreements mean very little to him."