US-China trade war will continue to escalate, says ANZ research note

WASHINGTON - The US Government is expected to continue to escalate the scale and scope of its trade and investment measures against China, according to a research note from ANZ Bank. “The latest coverage of USD200 billion of Chinese goods to be hit with tariffs is not an end point,” it says.

“The Trump Administration is not simply targetting the bilateral trade balance between the US and China. If it is, the trade friction would have been eased back in May,” the report says.

“The Administration’s policy towards China is also targetting other aspects, such as technology transfer, and the ultimate objective is to ensure that the US remains the largest economy in the world. This policy direction is unlikely to change even after the US mid-term elections in November.”

ANZ says that, apart from retaliation, China is expected to offset the negative economic effects of the trade measures through a more proactive fiscal policy. It says the People’s Bank of China (PBoC) will likely keep interest rates on hold even as the US Federal Reserve continues to hike rates. As a result, the widening yield differential will keep the yuan biased to the weak side.

Separately, the note adds, the US may announce import tariffs on Chinese goods worth USD200 billion any time this week. www.live.anz.com (ATI).