President Donald Trump wants to move ahead with a plan to impose tariffs on $200 billion in Chinese imports as soon as a public-comment period concludes next week, according to six people familiar with the matter.
Asked to confirm the plan in an interview with Bloomberg News in the Oval Office on Thursday, Mr Trump smiled and said it was "not totally wrong." He also criticised management of the yuan, saying China has devalued its currency in response to a recent slowdown in economic growth.
Companies and members of the public have until September 6 to submit comments on the proposed duties, which cover everything from selfie sticks to semiconductors. The president plans to impose the tariffs once that deadline passes, according to the people familiar with the matter, who spoke on condition of anonymity because the discussions aren’t public.
Broadening the tariff battle would mark the most significant move yet in a months-long trade standoff and dent China’s growth prospects. Data released on Friday will allay some concerns over the near-term outlook as China’s official factory gauge unexpectedly strengthened this month following government measures to underpin demand.
"China is more prepared, mentally, this time than it was for the previous round of tariffs," said Gai Xinzhe, an analyst at the Bank of China’s Institute of International Finance in Beijing. "The scale is enormous and once the tariffs materialise, they will definitely send jitters through financial markets."
Such unease was already on display Friday as Asian stocks declined, following losses in the US, where the S&P 500 tested the key 2,900 level. Treasuries, the dollar and the yen held on to gains. The tariff news exacerbated already fragile market sentiment amid currency routs in Argentina and Turkey.
Some of the people cautioned that Trump hasn’t made his final decision, and it’s possible the administration may enact the duties in instalments. The US has so far imposed levies on $50 billion in Chinese goods, with Beijing retaliating in kind.
It’s also possible the president could announce the tariffs next week but say they will take effect at a later date. The Trump administration waited about three weeks after announcing in mid-June that it was imposing tariffs on $34 billion of Chinese goods before they were implemented. The next stage of tariffs on $16 billion of goods took hold in August.
China has threatened to retaliate by slapping duties on $60 billion of US goods. The ministries of finance commerce didn't immediately respond to Bloomberg faxes seeking comments on Mr Trump's intentions.
The Trump administration is finalising the list of Chinese targets and tariff rate, which could range from 10per cent to 25 per cent, following six days of public hearings earlier this month. Trump’s plan to bring down his biggest hit yet on China comes as two-way trade talks show little signs of progress.
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China hawks have been on the ascendancy in the Trump administration. One of them -- US Trade Representative Robert Lighthizer -- has been responsible for one of the president’s biggest trade victories so far by forging a bilateral trade deal to replace Nafta with Mexico. The deal was announced on Monday and Canada is now negotiating to join.
The latest China tariff decision is causing heated debate within the administration, with Lighthizer and White House trade adviser Peter Navarro pushing for quick action, and Treasury Secretary Steven Mnuchin and White House economic adviser Larry Kudlow arguing for more time, according to people familiar with the matter.
Mr Trump cut off negotiations with China because of what he perceives as Beijing’s lack of cooperation in nuclear talks with North Korea, one of the people said. The president wants to squeeze China, believing the US has leverage over Beijing, that person said.
Trump on Wednesday accused China of pressuring North Korea not to bend in nuclear negotiations with the US. But he insisted that the trade differences would be resolved.
“As for the US-China trade disputes, and other differences, they will be resolved in time by President Trump and China’s great President Xi Jinping. Their relationship and bond remain very strong,” Mr Trump said on Twitter.
Edward Alden, a senior fellow at the Council on Foreign Relations in Washington, said that Lighthizer’s Nafta successes were strengthening his hand with the president. That raised the possibility that after months of being passed around various figures in the administration, the talks with China could finally end in the hands of one of its most able negotiators and influential China hawks.
If the president “hands the China file to Lighthizer, there’s a chance of real progress," Alden said. Nafta “is clearly a personal triumph for Lighthizer. He did this deal.”
Putting him in charge of China talks, were it to happen, “at least opens the door to a serious negotiation with China which we have not seen yet,” Mr Alden added.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Tips on buying property during a pandemic
Islay Robinson, group chief executive of mortgage broker Enness Global, offers his advice on buying property in today's market.
While many have been quick to call a market collapse, this simply isn’t what we’re seeing on the ground. Many pockets of the global property market, including London and the UAE, continue to be compelling locations to invest in real estate.
While an air of uncertainty remains, the outlook is far better than anyone could have predicted. However, it is still important to consider the wider threat posed by Covid-19 when buying bricks and mortar.
Anything with outside space, gardens and private entrances is a must and these property features will see your investment keep its value should the pandemic drag on. In contrast, flats and particularly high-rise developments are falling in popularity and investors should avoid them at all costs.
Attractive investment property can be hard to find amid strong demand and heightened buyer activity. When you do find one, be prepared to move hard and fast to secure it. If you have your finances in order, this shouldn’t be an issue.
Lenders continue to lend and rates remain at an all-time low, so utilise this. There is no point in tying up cash when you can keep this liquidity to maximise other opportunities.
Keep your head and, as always when investing, take the long-term view. External factors such as coronavirus or Brexit will present challenges in the short-term, but the long-term outlook remains strong.
Finally, keep an eye on your currency. Whenever currency fluctuations favour foreign buyers, you can bet that demand will increase, as they act to secure what is essentially a discounted property.
