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Fast Comment ChinaUS-China cease-fire positive for China’s suffering industrial sector

  1. US tariff hike postponed
  2. China’s manufacturing PMIs on a downward trend
  3. Trade war far from over yet
US tariff hike postponed
The cease-fire agreed between China’s Xi and the US’ Trump is positive for China’s exporting industrial sector. The planned increase from 10 percent to 25 percent in the US’s tariff on USD 200 billion of imports from China has been postponed in 90 days and will not be increased at all should negotiations end in an agreement where China promises concessions within intellectual property rights, non-tariff trade barriers and cybersecurity. China has promised to buy a “substantial” amount of American agricultural, energy, industrial and other products.
China’s manufacturing PMIs on a downward trend
The cease-fire comes as the Chinese industrial sector suffers due to both the domestic slowdown and trade war fears. Manufacturing PMI from Markit increased only marginally from 50.1 in October to 50.2 in November following four months of decline. The official counterpart fell from 50.2 to 50.0 in November and thus reached the lowest level in two years.
Trade war far from over yet
Whereas a cease-fire is a better outcome of the Xi-Trump meeting than many had feared, a word of caution is warranted. Even though both parties have promised to escalate trade negotiations, 90 days is not much to negotiate a more viable agreement given the huge gap between the two.


Disclaimer

Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

bjro03@handelsbanken.dk

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