Breakingviews - US-China trade clash risks all-out financial war

HONG KONG, April 10 (Reuters Breakingviews) - In the end, Donald Trump both blinked and doubled down on tariffs. As the U.S. president announced a 90-day pause on “reciprocal” levies for most major trading partners on Wednesday, he also raised those on China from 104% to 125%. The upshot? The world’s two largest economies remain locked in a retaliatory standoff that torches $600 billion in bilateral trade and could yet spiral out of control.

Prior to the latest hikes, Goldman Sachs analysts had forecast that 104% tariffs would lop 2.4 percentage points off China’s GDP growth, implying Beijing would achieve barely half its headline goal for economic expansion this year. Higher U.S. tariffs, the bank argued, would do diminishing damage, with the maximum hit topping out at 2.9 percentage points.

Trump’s delay to tariffs on other countries provides a reprieve to the People's Republic as well because it allows Chinese intermediate goods and transhipments to continue flowing to the U.S. via third countries like Vietnam. Meanwhile, Hong Kong has imposed no levies on American goods, leaving a sizeable loophole through which imports can continue flowing to the mainland at pre-Trump prices.

It creates some breathing ...
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