International credit rating agency Fitch Ratings has stated that the US government's proposal to impose tariffs on $50-60 billion worth of imports from China is unlikely to have a significant impact on the Chinese or global economy.
According to Fitch Ratings, the US administration has proposed the tariffs in response to what it considers to be unfair Chinese trade policies that have led to the acquisition of US technologies - invoking the authority provided by Section 301 of the US Trade Act. Aerospace, information and communication technology, and machinery will be targeted, with details due within the next two weeks. The administration will also consider measures to block Chinese acquisition of US technology through mergers and acquisitions and press the World Trade Organization (WTO) to examine China's technology licensing practices. $60 billion is equivalent to around 2.5 percent of China's total merchandise exports, or 0.5 percent of its GDP, but the impact of the tariffs on the Chinese economy would be much smaller. Some of these goods will still end up going to the US, given the lack of substitutes, while others could be diverted to different markets.
Fitch Ratings indicated that the bigger risk is that the US eventually imposes across-the-board tariffs on China, either because its bilateral trade deficit with China stays large or in the context of an escalating trade war between the two countries. The US accounts for almost one-fifth of China's total exports, equivalent to 3.6 percent of Chinese GDP, and so broader tariffs could have a sizeable impact on China's economy, and would have knock-on effects for the supply chain across the rest of Asia. A China-US trade war would also undermine global investor sentiment.