The escalating tariff war poses significant uncertainties for the global trade outlook in the medium term. SATS, due to its significant 50%/25% revenue exposure to the global/US air cargo handling business, is poised to be negatively impacted by a potential setback in globalisation and decline in global trade volume.
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Tariff war initiated by the US.
Last week, US president Donald Trump announced a series of sweeping tariffs aimed at addressing the US’ large trade deficits. Dubbed “Liberation Day”, the initiative introduced a tariff structure that exerts additional tariff rates of 10-49% on its major trading partners.
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Reponses by trading partners.
China swiftly responded with retaliatory tariffs of 34% on all imports from the US, as well as export controls to restrict exports of critical rare earth elements to the US.
The EU has decided to prioritise negotiation over retaliation, though it has prepared an initial set of targeted countermeasures.
Most of the other trading partners (including many Asian countries) have decided not to retaliate and signalled their wiliness to negotiate with the US.
Trump threatened that if China does not withdraw the 34% retaliation tariff on the US by 8 Apr 25, he will impose another 50% tariffs on China. This is expected to happen as China has vowed to fight to the end.
Tariff war posing significant uncertainties to global trade.
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Above is an excerpt from a report by UOB Kay Hian Research. Clients of UOB Kay Hian may be the first to access the full PDF report @ https://www.utrade.com.sg/.
