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China’s tariff to hurt companies that depend on exportation

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Moody’s Investors Service said ’s new retaliatory tariffs on exports, which were announced on Sunday, 1 April 2018, will hurt companies dependent on exports.

The tariffs China announced on 128 categories of imports affect a variety of sectors ranging from foodstuff to industrial goods.

The direct macroeconomic impact of these tariffs on is limited if is measured in terms of dollars of US exports affected relative to total US exports.

However, for firms, sectors and localities that depend on revenues from exports of items targeted by the tariffs, the impact will be more significant.

“As we have noted before, the importance of tariff announcements by both the US and China lies in what they may portend for overall and relations between the two countries,” said Moody’s.

Moreover, the US and China are the ’s largest economies and they play a large role in global , production supply chains and .

Therefore, their policy actions would likely have global macroeconomic and credit implications.

Although the macroeconomic impact of tariffs may appear limited they will have broader microeconomic impact.

“When measured by the dollar value of goods affected, if such tariffs are seen by global market participants as signaling an escalation in tensions, they will eventually have a broader macroeconomic impact by dampening market sentiment as well as investment decisions,” Moody’s said.

Financial markets have demonstrated their sensitivity to trade announcements over the past several weeks.

However, whether actual domestic or cross-border investment in particular sectors slow down as a result of rising trade tensions is yet to be seen.

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