Next step in China - US Trade War on hold for how long?

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Treasury Secretary Steven Mnuchin invited his counterparts in Beijing to start another round of talks. In effect, the next round in tariffs has for now been put on hold.

The invitation follows mounting pressure on the US administration from companies affected by the proposed tariffs. On Wednesday, organizations representing thousands of companies in industries including retailing, toy manufacturing, farming and technology said they are cooperating on a lobbying compaign called "Tariffs hurt the Heartland". Agricultural organisations have been notably vocal, under a new umbrella, Farmers for Free Trade, lobbying the Administration and local lawmakers. A number of republican lawmakers are also lobbying against the tariffs fearing they could hurt their reelection chances.

Its not clear if the Chinese will accept the invitation. Reportedly the Chinese government has grown wary of the unpredictable nature of the Trump’s administration.

In any case the deep differences between the 2 governments, most notably related to the structural changes to China’s economy asked by the US administration, make it unlikely that any deal is reached soon. The most likely outcome is still that at some stage the US will hit the button on the promised next round of tariffs on USD 200 billion of imports & that China will retaliate with its own tariffs. The list of products targeted is already known and can be viewed in these previous articles:

1. 25% US tariffs on wide range of Chinese wood products could start Friday 7th Sept

2. China prepares to hit US hardwood & softwood exports with 25% tariff

Results of a poll conducted by the American Chamber of Commerce in China were also released yesterday. The poll revealed that 30% of the firms consulted were moving their supply chains outside of China. A similar number was planning to move its supply chain outside of the US. A separate poll from the European Chamber of Commerce in China revealed that 17% of its members were putting on hold investment plans in China. This is in line with reports we get from numerous companies importing wood products in the US studying relocation of their China production to other regions, most notably SE Asia and South America.

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