An “all-out” trade war between the U.S. and China would hit the U.S. harder as China will likely retaliate on multiple fronts and because of the U.S.’s simultaneous fights with Canada and the EU, DBS said in a note last week.
“China’s retaliation will most likely extend to beyond goods to trade in services and to the operation of U.S. companies on mainland China,” DBS said.
Additionally, “the U.S. is pursuing trade wars on multiple fronts, extending the skirmish against its ostensible allies like Canada and the EU,” DBS said. “In each skirmish, the U.S. targets different economies and consumers, but the retaliation from each counterpart falls on the same
group of American consumers and businesses. The reckoning is in the pipeline, in our view.”
It added that there was “no positive to this saga,” noting China’s businesses and consumers will be hurt by the higher tariffs and trade barriers.
DBS said it defined a trade war as all goods traded between China and the U.S. being subject to 15-25 percent tariffs. That could shave 0.25 percent of gross domestic product (GDP) for both countries this year, and 0.50 percent or more next year, it estimated.
“Considering that China grows at 6-7 percent and the U.S. at 2-3 percent, we believe the damage would be greater to the U.S. than on China,” it said.
It added that this would also have knock-on effects.
“This would set off a major global chain reaction. Given their trade open-ness and exposure to the electronics supply chain, there will no respite whatsoever for Malaysia, Singapore, South Korea, and Taiwan in this tail risk scenario,” DBS said.