The tit-for-tat tariff dispute between the U.S. and China is turning up a notch and could draw the countries closer to an all-out trade war. That’s according to S&P Global Ratings in a
report published today.
“Our base case doesn’t factor in a Sino-U.S. trade war. We therefore consider the proposed tariffs are unlikely to materially threaten the economies or overall corporate credit health of either countries,” said S&P Global Ratings credit analyst Terry Chan.
The impact of China’s tariff proposal on its U.S. imports would be greater than that of the U.S. tariffs on Chinese imports. The $50 billion of goods affected represent 38% of U.S. exports to China, but only 10% of China’s exports to the U.S.
“However, the risk of a trade war is rising with the recent tit-for-tat retaliatory actions,” said Mr. Chan. “A breakdown in trade negotiations and policy missteps could lead to a full-blown trade war that would damage global business and consumer confidence, investment prospects, and growth.
“Should a flare-up in the trade dispute occur, we would need to re-analyze the impact on industry sectors not just for both countries, but also other trade-dependent nations.”