A fresh 15% tariff imposed on roughly $110bn of Chinese imports took effect on Sunday. The tariffs were first announced by US president Donald Trump on August 25. The affected items include mainly consumer goods but also certain technology products. An additional $160bn of Chinese goods, such as iPhones and laptops, will be hit with a 15% tariff on December 15.
The US has already levied a 25% tariff on about $250bn of Chinese imports, with the tariff set to rise to 30% in a month.
Also on Sunday, China’s retaliatory tariffs against US products took effect. Part of the $75bn of US goods are now facing a higher tariff of either 5% or 10%.
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China’s official manufacturing Purchasing Managers’ Index (PMI) dropped further to 49.5 in August from 49.7 in July, according to data from the National Bureau of Statistics.
The imports sub-index fell by 0.7 percentage point to 46.7 while the new export order index rose 0.3 percentage point to 47.2
“Frontloading of exports to the US ahead of higher tariffs supported trade and overall activity growth, but this effect will likely fade in the next few months,” Maggie Wei, China economist at Goldman Sachs, wrote in a Saturday note. “Downward pressures to growth have increased and we continue to expect more policy easing in the rest of this year.”
The employment sub-index declined to a 10-year low to 46.9, noted Yingke Zhou, China economist at Barclays in Hong Kong.
“While the latest tariff escalation and weaker economic data have increased the probability of more easing, we maintain our base case of no aggressive monetary easing in Q3, given lingering concerns about leverage, a house price bubble, sustained inflationary pressures, rapid CNY depreciation, and the potential for fiscal stimulus via a likely increase in the local government special bond quotas in Q4 and more tax cut,” Zhou added.
The non-manufacturing PMI edged up slightly, driven entirely by a rebound in the construction PMI. The services PMI declined again in August.
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Hong Kong’s anti-China demonstrations entered its 13th week this weekend.
On Saturday night, protesters staged a march on Hong Kong island even after receiving an objection letter from the police. They put roadblocks and eventually set those on fire near the police headquarters.
On Sunday, protesters occupied roads to and from the airport. The demonstration forced the airport authority to cancel 25 flights, according to a press release issued on Monday morning.
Protesters also vandalised turnstiles at some metro stations, forcing the city to shut down several subway lines on Sunday afternoon.
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The Chinese Financial Stability and Development Committee held a meeting on Saturday, where it discussed how to support the real economy and deepen the market reform, according to an official notice.
The committee concluded that market risks are “generally under control”.
As next steps, the committee will focus on three areas. First, it will foster a better transmission mechanism between monetary policies and the real economy. Second, it will maintain a sufficient level of liquidity in the market and implement prudent monetary policies. And third, it will try to better integrate fiscal policies with monetary policies.
Additionally, the regulators plan to support local government special purpose bond issuance and more innovation within the banking industry.