Neither Beijing nor Washington will budge on tariffs

Significance

Over the past few month the world’s two largest economies have exchanged threats to impose tariffs on each other. The first set on both sides took effect on July 6. The bilateral trade disputes create uncertainty in global financial markets. Current and future tariffs will hurt both economies and others around the world too.

Impacts

• China will try to compensate by seeking cooperation with other regions and promoting initiatives such as the Belt and Road.
• China is likely to continue acting toughly on other issues, such as the Taiwan Strait and South China Sea.
• Tariffs and weaker domestic demand will put downward pressure on China’s manufacturing sector in particular.
• Volatility in China's stock markets will have spill-over effects on other Asian markets and test the resilience of these economies.