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China Facts: Risk on the trade risk is overall relatively limited but has substantial impact on certain sectors

 

 

The profile of both the US and Chinese economies suggest that the risk that either will be derailed by higher tariffs and a slowdown in trade may be relatively limited. Both economies are large and domestically driven. The trade dispute will, however, have a substantial impact on specific players, value chains and regions with high exposure to tariff changes. About half of the $250bn tariffs during the initial two rounds imposed by the US on China are on electronics or machinery - and foreign firms produce 87% of electronics in China, and 60% of machinery. About 40% of China's exports are from foreign-owned enterprises and joint ventures. According to a recent survey from Amcham in China found that 31% of US respondents were already delaying or canceling investment decisions, 18% were considering relocating some or all of their manufacturing outside China, and 3% were even thinking about exiting the China market altogether. *)  

 

*) McKinsey Global Institute December 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Hans Henrik Pontoppidan
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