US Tariffs and timelines: there is time for negotiations - Nomura

Analysts at Nomura noted that the Office of the US Trade Representative (USTR) released the list of goods from China that would be subject to a 25% tariff as a result of the Section 301 investigation.

Key Quotes:

• "The list totals roughly $50bn in goods imports, implying $12.5bn in revenue raised."
• "There will be a lengthy comment and review period, potentially lasting months, before the tariffs would go into effect." 
• "The tariff list is not final, and could eventually be changed and/or reduced."
• "China released its own proposed tariffs on select US exports including soybeans, autos and chemicals."
• Chinese officials have said that their response is proportional, i.e., a 25% tariff rate on Chinese imports of products from the US that are worth roughly $50bn";
• "These tariffs will not go into effect and had no set implementation date.
• "We believe the US and China’s announcements should be viewed as opening positions of a negotiation. At the moment, we think the most likely outcome will be an agreement that moves both sides away from the tariffs proposed so far."
• "The US has weakened its demands on auto content in the NAFTA renegotiation process, lowering a significant hurdle in the talks. That, coupled with ongoing meetings this week with key NAFTA negotiators, continues a string of positive news about the negotiation process. However, there remains a sizable risk that an agreement will not be reached."
• "If the tariffs listed by both countries finally take effect, the macroeconomic consequences of these measures alone would likely be small (the $12.5bn in tariffs for the US are roughly 0.1pp of GDP)."
• "We expect the impacts from the current trade actions to be small enough so that they will not be a major factor in the FOMC’s future policy decisions."

Looking ahead:

• "The next steps on the Section 301 timeline will involve a public hearing (on 15 May) followed by an opportunity for rebuttal comments (22 May) before USTR will review all comments prior to making a final determination. This allows ample time for the US and China to reach an agreement that would reduce trade tensions," the analysts concluded.