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Superforecaster Fridays: US-China tariffs

egx
22 February 2019

This week's forecast
On 2 March 2019, will US tariffs on a majority of the 5,745 Chinese products found on the 17 September 2018 USTR tariff list be higher, the same, or lower than they were when they took effect 24 September 2018?

The Superforecasters currently assign a 95.5% probability that US tariffs on a majority of Chinese products will remain the same after the 1 March deadline for the current round of US-China trade talks. After initially assigning a 28.9% probability the US would raise tariffs—US President Donald Trump threatened to raise tariffs from 10% to 25% on a range of Chinese goods on 2 March—the Superforecasters now only assign a 3.4% probability to a tariff hike.
The most likely outcome of the current round of US-China trade talks is a “mini-deal” that averts a tariff escalation while allowing for a continuation of trade talks beyond the 1 March deadline. Trump would accept China's offer to buy more US goods, while noting enough progress on more challenging structural issues to keep talks going.
Trump probably calculates that a tariff escalation would hurt the stock market, the US economy and impact his popularity with key groups like farmers. At the same time, Trump will be wary of declaring victory with a deal that is perceived as weak by his supporters and leaves him open to criticism by Congress and Democratic presidential candidates.
An extension of trade talks would still be vulnerable to future disagreements on more challenging issues in the trade talks. During the current round of trade talks, China has offered to purchase more US goods (paying heed to Trump's focus on the trade deficit) but has stopped short of promises to address structural concerns on intellectual property protections, forced technology transfer and subsidies for key sectors that are at the center of the trade dispute. In case talks break down, Trump could revisit the threat of a tariff increase.

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