China trade retaliation against US difficult, negotiations more likely: Natixis

HONG KONG - In a research note, Natixis points out that trade retaliation against the US would be costly for China, and this should push China back to the negotiating table.

“A possibility would be for China to retaliate with measures unrelated to trade, in the sphere of investment and even financial ties, including sales of US treasuries, (but) what seems clear is that we need to get used to a more complicated US-China relationship.”

“The reality is that retaliation through increasing tariffs is a double-edged sword and not every import product serves the purpose of retaliation, Natixis says, adding that only 3% of total Chinese imports from the US (distributed across 362 products at the HS-6 level) meet the criteria.

“Among the top 100 products (from the 362 ones which could serve China’s retaliation purposes), the most relevant ones, such as semiconductors and other high-tech products, are essential for China to achieve its Manufacturing 2025 Strategic plan,” Natixis says.

“The options left in terms of targettable products are in the categories of wood, aromatic hydrocarbon mixtures, and waste copper.

“For these products, the Chinese market constitutes more than 40% of US exports, but at the same time, China can still take 80% of its needs  from sources other than the US.” www.natixis.com (ATI).