Daiwa Research said the tariff decision from the White House came as no surprise, as a Sino-US trade war was one of the four macro themes in its 2018 outlook.
The research house doubts China can make many concessions that would satisfy the US. For the time being, China has responded with reciprocal 15-25% tariffs on US$3bn goods from the US.
Assuming a tit-for-tat response, Daiwa believes that China will suffer more than the US because of its higher exposure to exports. China's exports to the US are 3.3x bigger than US exports to China. The US economy is 1.5x bigger than China's.
It estimated that every 10% US tariff on all Chinese goods leads to about a 1% loss for China's GDP. This, however, does not take into account any further potential impact on China's FDI, since long-lasting tariffs may lead to considerable FDI repatriations from China.
Daiwa said it doesn't call it a trade war anymore, instead a "great power rivalry".
And Asia is obviously caught right in-between.
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