The additional 10% tariff that Donald Trump has applied on Chinese goods will have a relatively modest impact on China’s economy, especially if the PBOC allows the renminbi to adjust. But this is likely just the first round in a protracted trade war with the US. We expect US tariffs to ratchet up further over the coming quarters, eventually weighing more heavily on Chinese exports. Still, there could be a silver lining for China, with President Trump’s willingness to undermine US alliances likely to leave China in a stronger geopolitical position.
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