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US Tariffs Will Take Hold in 2019 – China Braces Itself

US Tariffs Will Take Hold in 2019 - China Braces Itself

China has seen continued export growth in double digits, with the year-over-year expansion in September at 14.4 percent and for the month of October 15.6 percent, both shockingly big numbers (some analysts say that the numbers are inflated as exports were increased ahead of tariffs being put in place). The November number dropped to 5.4 percent, according to Wind Info database in a CNBC piece. Some analysts believe that the Trump tariffs are only psychological so far in the trade war. The real impact on Chinese growth might be in 2019 – this view seems to be growing on Wall Street.

We at Classiarius have done some calculations and covered volumes of research and our conclusion is that the the US and Chinese economies will slow in 2019, and of course the global economy will follow. It will likely be a tough year for many emerging markets including Turkey, Iran and Brazil to name a few. So when synchronized global growth fades, and it likely will in 2019, shocks to the system will increase and the US could see GDP fall from the 4.0 percent level to the 1.0 to 2.0 percent range. This is likely a positive. And with regards to China, growth could slow from the 6.7 percent level to the 6.2 percent level. Note that some analysts feel that a GDP level of 3.0 percent or less in China will result in social unrest and riots on the streets.

Trump has initiated tariffs on $250 billion worth of Chinese goods – this being a major part of the bilateral goods deficit in 2017. The White House has said if a deal with China is struck, there will be no tariffs on January. The China trade surplus hit a record high with the US in November and by all accounts, is still an unacceptable number. More on this topic in the coming weeks.

Team Classiarius



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