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Concerns expressed on reported US China tariffs

Staff Writer13 May 2024
China deflation deflationary crisis

UK-based financial advice firm, deVere Group has warned of collateral damage flowing from US President Joe Biden’s reported fresh China tariffs.

It has warned such a move by the US risks  triggering short-term market volatility.

deVere Group’s chief executive, Nigel Green noted media reporting that Biden is set to announce new tariffs on China as soon as next Tuesday targeting strategic sectors including electric vehicles, semiconductors and solar equipment, according to two people familiar with the matter.

Existing levies are expected to also be maintained. The news builds on the President’s calls last month to extend tariffs on Chinese steel and aluminium.

“The imposition of tariffs on these critical sectors signals a potential disruption to global supply chains,” he said. “Companies heavily reliant on imports from China for components like batteries and solar cells are likely to face increased costs, impacting their profit margins.”

​“This uncertainty can be expected to lead to a knee-jerk sell-off in stocks of companies directly involved in these industries, such as green-tech, as investors seek to mitigate risk.”

“In addition, China will retaliate – as it did when Trump imposed tariffs and it hit back with levies on US agricultural goods,” Green said.

​“This adds another layer of uncertainty to the equation – which markets loathe – therefore increasing the likelihood of turbulence.”

​In the longer term, Chinese companies, faced with the prospect of increased tariffs on their exports to the US, are likely to explore alternative strategies to mitigate the impact.

​One such strategy involves exporting their products to third-party countries not affected by the tariffs before re-exporting them to the US. This tactic, known as transshipment or tariff engineering, allows Chinese firms to circumvent the tariffs by exploiting loopholes in trade regulations.

“The use of workarounds by Chinese companies may exacerbate tensions between Washington and Beijing, potentially leading to further escalations in trade disputes,” says the deVere Group CEO.

“Should the US government become aware of such tactics, it may respond by imposing additional measures to close loopholes and strengthen enforcement mechanisms.

Staff Writer

Staff Writer

Financial Newswire

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