New tariffs threatened by the US would be more harmful to China than the first batch, says bank CEO

  • The proposed U.S. tariffs on an additional $200 billion in Chinese goods, if implemented, could harm the world's second-largest economy, said Piyush Gupta, CEO of Singapore’s DBS Bank.
  • That’s because the targeted Chinese goods include a greater number of finished products, which can be replaced by similar ones from other sources, he said.

The proposed U.S. tariffs on an additional $200 billion in Chinese goods would hit the world’s second-largest economy more severely than the previous custom duties did, according to the chief executive of Southeast Asia’s largest bank.

That’s because the latest list of targeted Chinese goods includes a greater number of finished products, which can be replaced by similar ones from other sources, Piyush Gupta, the CEO of Singapore’s DBS Bank, said on Friday.

The Trump administration on Tuesday said it plans to impose 10 percent tariffs on $200 billion in Chinese goods, which include refrigerators, electronics, cotton and auto parts. The tariffs will undergo a two-month review process, with hearings in August.

Those tariffs, if implemented, “might start biting a little bit more in terms of the volume of trade” compared to the levies on $34 billion in Chinese goods that came into effect on July 6, Gupta told CNBC’s Martin Soong at the DBS Asian Insights Conference in Singapore.

Impact from the earlier round of U.S. tariffs on the Chinese economy may be limited as there aren’t many alternatives to those affected goods, he said.

“I think most of these relate to components mostly in the mobile phone and the personal computer supply chain. I think alternate sources of supply are limited,” the CEO said.

“The total impact is probably price increases of magnitude of 5 to 10 percent, my own sense is these will be passed on to the end consumer or perhaps absorbed by the supply chain. I don’t think these will reduce China’s export volume anytime soon. It’ll take at least two to three years for the supply chain to be recreated,” he added.

Trade-reliant economy already hit

Even before tensions between China and the U.S. turned into a full-blown trade war, some trade-dependent economies have experienced a slowdown in growth.

Singapore, a Southeast Asian country with one of the highest trade-to-GDP ratio in the world, said advance estimates point to its second-quarter growth missing forecasts. The economy is expected to expand by 3.8 percent year-over-year in the second quarter, short of the 4 percent growth estimated by Reuters.

Economists expect rising trade tensions to further threaten growth in open economies such as Singapore. For Gupta, it’s a concern that the world is moving “backward” after making much progress to promote a more open trading system.

“I think it’s safe to say that the world has benefited enormously from an open trading system ... so anything that goes backward from that is a cause for concern,” said Gupta.