Chinese officials described the Trump administration's posturing on trade as the product of an "anxiety disorder".
KUALA LUMPUR: Moody's Investors Service expects more rated Chinese companies to be affected in the latest development in the US-China trade dispute.
The rating agency said on Tuesday the rising tensions between the US and China expand the categories of Moody's-rated Chinese companies exposed to US tariffs.
On Aug 1, the US announced plans to raise tariffs to 25% from 10% on US$200bil worth of Chinese imports.
"The new list of products expands the categories of Moody's-rated companies exposed to the planned US tariffs, because it includes a wider range of products than earlier lists," said Lina Choi, a Moody's vice president and senior credit officer.
"And, as the US expands its list of Chinese products subject to tariffs, a growing number of Moody's-rated Chinese companies will likely be affected through the production value chain," Choi added.
Moody's conclusions are included in its just-released report titled "Rated non-financial companies – China: More companies are likely to be affected as trade dispute with US escalates.” It is authored by Choi ands Lillian Li, a Moody's vice president and senior analyst.
The effect of the tariffs will be amplified as the lists grow, because companies exposed to higher-cost
commodity products - which they use as as raw materials - will gradually diversify, or change their product sources to suppliers outside China, the US, or both.
The resulting changes in demand for and supply of certain commodities across borders will cause fluctuations in pricing, which will in turn lower the predictability of Moody's-rated Chinese companies' revenue and cash flow generation.
“Given the wide range of Chinese products the US is targeting, component manufacturers for consumer
appliances and electronic products such as computers, computer accessories, and video and audio equipment will also see an indirect effect.
“Moody's estimates that about 30% of China's total exports to the US in 2017 consisted of consumer appliances and electronics, based on data from the US Census Bureau.
Most of the products from Moody's-rated component manufacturers are not directly exposed to the proposed and implemented tariffs.
However, if their downstream customers are affected, Moody's expects a price impact along the value chain, which will take some time to surface.
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