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Tariff Headlines versus Implementation

| July 02, 2018
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While trade headlines have garnered a lot of attention, and roiled markets in some instances, it’s important to reiterate that neither side wants a trade war. The tit-for-tat
we’ve seen over the past few months may be more aptly viewed as the U.S. and China feeling each other out to better understand the other’s pain points as they
(hopefully) progress towards a more mutually beneficial relationship as major trading partners. Looking back at some of the recent back-and-forth may help put the
most recent $200 billion announcement into perspective. But first it’s important to remember that there’s typically ~60 days from the announcement to imposition of the
tariffs, intentionally leaving time for reaction, negotiation, and adjustment. In March, it started with import taxes on steel and aluminum, with no stated target value,
before targeting sanctions on one of China’s largest telecom firms on national security grounds; then Treasury Secretary Mnuchin announced the “trade war” was on
hold late last month as negotiations continued and China agreed to buy “significantly more” from the U.S. Importantly, these jabs are not intended to be knock-out
punches, and though the dollar value of the latest announcement is higher than previous iterations, it’s still small relative to the size of the economies in question.

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