Trade Tensions: Advantage U.S. or China?

As the U.S. and China continue to feel each other out to better understand the other’s pain points, you may wonder which side has the advantage in negotiations. Our LPL Chart of the Day highlights some major tariff-related advantages and disadvantages for both countries in current negotiations.

Advantage U.S.: Goods Surplus. Last year the U.S. exported $130 billion in goods to China, while China exported $505 billion in goods to the U.S. Consequently, China would run out of direct reprisals quickly should it look to match U.S. tariffs.

Advantage China: Consumer Price Sensitivity. Consumer prices are likely more sensitive to Chinese exports to the U.S., which have a greater proportion of consumer end products, than U.S. exports to China, which have more intermediate goods.

LPL Research Chief Investment Strategist John Lynch explains, “We expect that both sides will take some damage during the process, but the U.S. retains a structural advantage in the trade dispute as it exports far fewer goods to China than China exports to the U.S.; however, U.S. consumer prices are likely more sensitive to Chinese exports, which have a greater proportion of consumer end products.” For more insights into the factors being considered in current negotiations between the U.S. and China, please see our Weekly Economic Commentary.

 

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