Moody's: US Tariff hike will weaken rules-based trade

Moody's says move will weaken

FILE PHOTO: U.S. President Donald Trump and China's President Xi Jinping meet business leaders at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Damir Sagolj/File Photo

Moody's investor services on Friday said the 25% tariffs imposed by the US on $200 billion of Chinese imports from the previous 10% could exacerbate the uncertainty in the global trading environment and lead to the weakening of the rules-based system that has underpinned global growth, particularly in Asia, over the past several decades.

“Higher tariffs could also lead globally to the repricing of risk assets, tighter financing conditions, and slower growth,” Michael Taylor, Managing Director, Credit Strategy, Moody’s Investors Service said.

In addition, the trade tensions could result in an increasingly fragmented global trading framework;

For China in particular, the higher tariffs will have a significant negative effect on exports, against the backdrop of a slowing economy. Further, policy easing will mitigate only some of the impact, and increased uncertainty and weaker business sentiment will hinder private investment decisions, he said in a statement.

His statement came after he United States hiked tariffs on more than $200 billion in goods from China Friday, the biggest action on commerce by President Donald Trump that is sure to hit consumer demand in the US and have a spiralling impact on other economies.

The new US tariff at the rate of 25% would be imposed on 5,700 product categories from China.

“(China) deeply regrets that it will have to take necessary countermeasures,” China’s Ministry of Commerce said in a statement.

China's stocks jumped after an initial wobble following the tariff hike. The sentiments elsewhere in Asia were mixed. Indian stocks opened strong but gave up their initial gains after the news

“While we believe that a trade deal will eventually be reached between the US and China, the risk of a complete breakdown in trade talks has certainly increased,” Moody's said.

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