The US-China Trade War: What’s Next?
A lot has gone on with China this last week.
1. On August 1, 2019, President Trump announced that the United States will on September 1 impose a 10 percent tariff on essentially all Chinese goods not previously subject to tariffs. This latest round of tariffs is being referred to as “List 4” tariffs and it will hit about $300 billion worth of imports from China. If that new tariff goes ahead, it will mean that nearly all products (save for those all imports of Chinese goods will soon be subject to tariffs.
2. Yesterday, China’s central bank allowed the Yuan to weaken to more than 7 RMB per dollar. CNBC nicely describes the significance of this:
The Chinese authorities have not let the currency weaken past the 7 yuan-per-dollar threshold since the global financial crisis. In fact, they have in previous years — such as in 2016 — burned a substantial portion of their foreign reserves to defend the currency from breaching that mark.
It’s for that reason that currency experts have long viewed that mark as a psychological important level. Breaching 7 yuan per dollar is a crucial development partly because investors don’t know how much more weakness the PBOC [People’s Bank of China] is willing to tolerate, so they could sell their investments in China to curb losses — and thereby trigger significant capital outflows from the country.
I predict the following over the next few months:
1. The 10% List 4 tariffs will go into effect on September 1.
7. Companies (U.S. and otherwise) that manufacture their products in China for export to the United States will continue to move their manufacturing out of China, if they can. See How to Move Your Manufacturing from China AND Protect Your IP.
8. Most economists will continue to insist that the trade war will end soon because it is bad for the economies of China and the United States and the rest of the world. Those whose livelihoods depend entirely on China will make the same prediction. My law firm’s international lawyers will continue to insist there is no resolution in sight. See When Will the US-China Trade War End? It’s the New Normal. ‘
What do you see happening?
Tune in tomorrow for how your company should respond to the above.
We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.
Source: https://www.chinalawblog.com/2019/08/the-us-china-trade-war-whats-next.html
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