Companies worry less about punitive tariffs and more about China being labeled a currency manipulator by the US, as it would bring more uncertainty and prolong the trade dispute between the two countries, JPMorgan Asset Management Taiwan said on Thursday.
Washington is likely to impose a 25 percent tariff on all imports from China next year, Tai Hui (許長泰), Hong Kong-based chief market strategist at JPMorgan Funds (Asia) Ltd, said at a news conference in Taipei.
The US and China have imposed punitive tariffs on billions of dollars of each other’s goods, with US President Donald Trump threatening to levy more, Hui said.
Hui said he does not expect the US-China trade war to end in the near term.
Whether or not the Republicans win in the US midterm elections next month, “Trump is going to maintain his policy against China, or even strengthen his stance if the Republicans win,” Hui said.
Trade-reliant Taiwanese companies would be affected by this development, he said.
“However, this is not the worst scenario next year,” as most companies are psychologically prepared and are planning to absorb the tariffs as additional costs or pass them on to consumers, Hui said.
Instead, companies are more worried about the US labeling China a currency manipulator, a move that is not expected to lead to trade sanctions, but would definitely lead to more uncertainty and escalate trade tensions, he said.
As of Thursday, the yuan had declined 6.08 percent against the US dollar, slower than the South Korean won’s 6.46 percent fall.
That also compares with a 4.04 percent drop in the New Taiwan dollar and a 3.44 percent decline in the euro.
Accusing China of manipulating the yuan to boost its exports, Trump had promised to label China a currency manipulator during his presidential election campaign two years ago.
The US Department of the Treasury has thus far not yet named China a manipulator, but has placed it on a monitoring list in its currency reports, Hui said.
The US is to release its latest currency report next week.
US laws set specific criteria that a nation must meet to be labeled a currency manipulator. These are: a minimum trade surplus of US$20 billion with the US, a current-account surplus in excess of 3 percent of GDP and repeated interventions in the currency market.
China only meets one of the criteria, with its surplus with US reaching US$375 billion last year, JPMorgan said.
Additionally, companies are concerned that China’s high-tech exports to the US might encounter problems shipping to the US, which could disrupt their production, Hui said.
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