Developments in Washington: trade war ping pong - Nomura

Analysts at Nomura explained that the US-China tariff ping pong has cleared the net three times. 

Key Quotes:

"First, the US announced potential tariffs of 25% on $50bn of imports from China. Once USTR identified those products, China quickly announced proposed tariffs of its own on $50bn of imports from the US, a proportional response. Then, in a surprise announcement, the White House and the Office of the US Trade representative noted on Thursday night that they would identify an additional $100bn worth of Chinese goods imports to levy 25% duties on. 

In a press conference in Beijing, China’s government signaled that it would respond in kind. At the moment, we continue to view these actions as opening positions for an eventual negotiated settlement between the US and China, consistent with our Asia economists. 

However, the aggressive behavior of the Trump administration undoubtedly raises the risk of a fullblown trade conflict between the two countries. President Trump has yet to list the broader concrete changes that his administration seeks from their Chinese counterparts. In contrast to the US-China developments, NAFTA negotiators met in Washington this week, aiming for ironing out an agreement in principle in time for the Peru Summit of the Americas 13-14 April. Various news reports indicated continued softening of the US position with respect to rules of origin and other hardline positions, keeping the possibility of a breakthrough in the negotiations very much alive. 

While the short time frame before the summit complicates reaching an agreement, leaders from Canada, Mexico and the US voiced optimism this week that an eventual renegotiated NAFTA was attainable in the near future. Wrapping up the renegotiation process would provide the Trump administration an important policy achievement before the upcoming Congressional midterm elections in November."