U.S. President Donald Trump has announced his decision to impose a 10% tariff on an additional USD200 billion of Chinese imports starting on September 24, on top of the 25% tariffs already in force on USD50 billion of Chinese imports. The tariff rate on the latest batch of goods will rise to 25% on January 1, 2019. The new tariffs would apply to more than 1,000 products, including smartphones, televisions, toys, and a range of other products. Some products, such as smartwatches, were left off the list. These penalties could drive up the cost of a range of products ahead of the crucial holiday shopping season. These tariffs are paid by U.S. companies that import the products, though they often pass the costs along to U.S. consumers in the form of higher prices.

China retaliated by announcing it will impose tariffs on USD60 billion of U.S. imports, effective on September 24. Trump said that in case China retaliated, he would immediately pursue phase three, which is tariffs on approximately USD267 billion of additional imports. This move would subject all Chinese imports of roughly USD500 billion to tariffs. The U.S. president blamed “unfair policies and practices” for the escalation. “For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies. We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices,” Trump said.

President Trump has accused China of a number of unfair trade practices. He wants China to buy more American products, open up China to more U.S. investment, and stop what he calls “stealing U.S. intellectual property”, among other accusations.

Even as President Trump imposes new tariffs, Treasury Secretary Steven Mnuchin was planning to restart talks with Chinese leaders soon, but they have previously announced they would not negotiate with a gun pointed at their heads. President Trump tweeted: ““We are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home.” The U.S. ran a USD233.5 billion deficit in goods trade with China during the first seven months of the year, an 8% increase compared with the same period in 2017. Corporate executives increasingly believe the trade dispute can only be resolved by direct talks between Trump and Chinese President Xi Jinping. The two leaders may see each other at the United Nations General Assembly in New York later this month and are expected to meet on the sidelines of the G20 summit in Buenos Aires in November, the South China Morning Post reports.

China is putting off accepting license applications from American companies in financial services and other industries until Washington makes progress toward a settlement of the ongoing trade war, Jacob Parker, Vice President for China operations at the U.S.-China Business Council (USCBC) said. The license delay applies to industries Beijing has promised to open to foreign competitors, such as banking, securities, insurance and asset management. Chinese authorities denied that licenses were delayed and emphasized that U.S. companies were still welcome in China. Economists have warned that Beijing might also target service industries such as engineering or logistics, in which the United States runs a trade surplus with China.

Chinese Vice Premier Hu Chunhua has called for a rejection of protectionism and said unilateral trade policies by some countries posed a “most serious hazard” to the world economy. “Some countries’ protectionist and unilateral measures are gravely undermining the rules-based multilateral trading regime, posing a most serious hazard to the world economy. We must categorically reject protectionism and unilateralism, firmly support multilateralism, and uphold the world economy and multilateral trading regime,” he said during a visit to Hanoi.

More than 60 U.S. industry groups launched a coalition, Americans for Free Trade, to oppose the imposition of tariffs. The business coalition includes groups representing some of the nation’s largest companies as well as representatives of almost every sector.

Facing the trade war with the U.S., China strengthened its relations with Russia as President Xi jinping attended the fourth Eastern Economic Forum in Vladivostok and held talks with his Russian counterpart Vladimir Putin.

The economy in Guangdong is starting to suffer badly. Its purchasing managers’ index (PMI) shows the province’s manufacturing industry contracted in August for the first time in 29 months, with new orders falling to a 30-month low and new export orders declining for the third straight month. Some companies have already moved to Vietnam to take advantage of lower costs. South Korea’s Samsung Electronics, for instance, is cutting its smartphone production in China, while at the same time strengthening its production lines in Vietnam and India, targeting rising demand in these fast-growing markets as well as making them production bases for exports to the global market.

The European Union Chamber of Commerce in China surveyed its member companies to better understand how the recently escalated tariffs on a variety of products traded between the U.S. and China affected European firms doing business in China. Responses were collected from 193 respondents across a wide variety of industries. This survey ended on September 3, and thus does not reflect any potential changes that may occur after that date. At the time of publishing, the Trump Administration had not yet decided to move forward with the addition of another USD200 billion worth of products imported from China to the current levies.

The U.S.-China trade war is causing significant disruptions to global supply chains and is seriously impacting companies that are neither Chinese nor American. Respectively, 53.9% and 42.9% of respondents viewed the American and Chinese tariffs negatively, which is more than ten times the number that viewed them positively.

Negative views of both country’s tariffs are common among European businesses in China. However, 53.9% of members viewed the U.S. tariffs on Chinese goods negatively, roughly 12 percentage points higher than the number that reported negative views of the Chinese tariffs levied on American imports. As there are far more goods produced in China for export to the U.S. than there are produced in the U.S. for export to China, a higher proportion is expected. However, the high rate of negative views on either side of the trade war is emblematic of the degree of interconnectivity in the global economy.

Neutral views are common. This reflects the reality that many European firms in China produce for the Chinese market, and that many of those firms rely on local suppliers or suppliers in countries other than the U.S. Positive effects from tariffs imposed by either the U.S. or China were rare, and diffuse across sectors. There were no clear patterns for which industries were more likely to see the tariffs positively.

When asked what measures companies were taking to respond to the tariffs, roughly the same number of members reported that they are relocating out of the U.S. or China respectively, indicating that neither side is ‘winning’, as both are equally prone to losing companies as a result.
The most common response was inaction and continued monitoring of the situation. However, the second and third most common responses were to hold up on investment/capital expenditure and/or to hold up on business expansion efforts. Due to some overlap in these two responses, a total of 17% of respondents that might have otherwise contributed further towards growth are opting not to do so due to the looming uncertainty caused by the trade war, according to a briefing paper by the European Chamber.

The American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai also jointly released a study on the impact of the tariffs imposed by China and the U.S. on each other since July. Close to two-thirds of respondents said the tariffs are having a negative impact. The survey said 63.6% reported the initial U.S. tariffs on USD50 billion in Chinese goods are affecting their business operations. When asked about the implementation of the possible additional U.S. and Chinese tariffs, the proportion of members who cited a negative impact jumped to 74.3% and 67.6%, respectively. The percentage reporting a “strong negative impact” doubled from 21.5% to 47.2% for the U.S. tariffs. Over 430 companies responded to the survey, the China Daily reports.

The European Union and China must urgently strengthen relations to “alleviate the disruption” to the global economy, Nicolas Chapuis, the new EU Ambassador to China, said. He also called for progress in discussions between China and the EU about reform of the World Trade Organization (WTO), ongoing negotiation of a China-EU investment treaty and an agreement on protecting the intellectual property of European and Chinese products. “In this shifting of the global situation, Europe must bring, with China, the building blocks of stability and prosperity,” said Chapuis at a press conference in Beijing. “This is not only important to the EU and China, it is crucial to the rest of the world, he added. Chapuis said it was normal for two big economies to have “frictions and tensions” but the EU remained open to Chinese investments. “We do not want less Chinese investment; we want more,” he said.

The 2018 World Internet of Things Exposition is being held at the Wuxi Taihu International Expo Center in Wuxi, Jiangsu province, from September 15 to 18. The IoT expo offers new experiences in areas including intelligent driving, shopping, catering, agriculture and healthcare.

The LTE-V2X, the world’s first citywide car networking application system, is showcasing the concept of intelligent traffic. The V2X, short of vehicle to everything, covers vehicle-to-vehicle, vehicle-to-infrastructure, vehicle-to- internet and vehicle-to-pedestrian communications. The LTE-V2X also plays an important role in automatic driving. By analyzing real-time traffic information, the system can choose the best driving route automatically, reducing traffic congestion dramatically. Sensors can perceive the vehicle’s surroundings and react swiftly to avoid road accidents as much as possible. During the Expo, Wuxi launched a car networking system covering 226 intersections and five elevated highways across the city, aiming to serve 100,000 vehicles.

The national intelligent transportation comprehensive testing base in Wuxi plans to start public road testing
of autonomous vehicles. The base is the first and only one of its kind initiated by the Ministry of Public Security so far. Unveiled in August last year, the testing base will cover more than 138,600 square meters upon completion at the end of 2019. The closed road for testing will be 3.53 kilometers and at least 150 different driving scenarios are included in the testing base. Total investment is about CNY1 billion. SAIC Motor and Audi China were granted testing licenses for their autonomous cars. Audi China will set up a center in Wuxi in the first quarter next year to conduct research and development as well as testing. BMW and Daimler previously already obtained licenses issued by the municipal governments of Shanghai and Beijing respectively.

An unmanned supermarket developed by China Telecom and convenience store chain Lawson is another highlight of the Expo. In the supermarket, customers can pay for goods by scanning their faces, with a half price discount included courtesy of China Telecom. According to the organizing committee of the 2018 World IoT Expo, more than 450 enterprises are taking part in the event, among which 35 are Fortune Global 500 companies. A record 180,000 visitors are expected to attend this year’s Expo. Dozens of high-level forums, discussing intelligent manufacturing, the industrial internet, artificial intelligence, big data, IoT information security, intelligent agriculture and intelligent environmental protection, will be held at the expo. Currently, more than 1,000 IoT companies have settled in Wuxi’s High-tech District, which cover all the sectors of the IoT industry chain, including semiconductor chips, cloud computing and big data, the China Daily reports.

A recent report from market consultancy IDC predicted that China will become the world’s largest Internet of Things (IoT) market by 2022. The IoT market in China was already worth more than CNY1 trillion last year, and is expected to maintain rapid growth in the next few years. Smart cities, the industrial IoT, internet of vehicles and the smart home have emerged as the major four market segments. Gartner estimated that 8.4 billion connected devices were in use globally in 2017, with a 31% increase year-on-year.

Nio, the start-up trying to take on Tesla in China, has slashed its fundraising size by nearly half as it became the first Chinese electric vehicle (EV) maker listed in the U.S. Backed by Tencent, Nio is offering 160 million American Depositary Receipts (ADRs) at USD6.26, near the bottom of the indicative range of USD6.25 to USD8.25 per ADR. The fundraising’s value now stands at USD1 billion, down 44% from the previous target of USD1.8 billion in its initial prospectus published on August 13. “An important issue is about the overall outlook of the Chinese EV sector,” said Angus Chan, Shanghai-based Analyst for Bocom International. “The competition is fierce, as many players are entering the market, while there is only so much demand, and EV makers’ short-term profitability is being questioned.”

Nio’s shares closed 10% up on their New York IPO debut in one of the year’s largest Chinese public offerings in the U.S. Nio raised USD1 billion and has a goal to turn profitable within three to four years.

Nio is a relative newcomer to the rapidly growing Chinese market. Founded in 2014 by Li Bin, it only launched its first production vehicle the ES8 – an all-electric, seven-passenger SUV – in December last year. The company claims its cars match Tesla’s models in performance, but at half the list price. The ES8 sells at a base price of CNY448,000, while Tesla’s Model X comes with a whopping CNY920,000 price tag in China. The company has delivered 1,381ES8s, and also has deposit-backed orders for another 15,700, it claims. Nio only started generating revenue this year, with USD7 million in the first six months. But it suffered a net loss of more than USD502 million during the same period. The company expects its capital expenditure to reach USD1.8 billion over the next three years.

Xie Zhicai, Analyst for Huatai Securities, said that “the clock is ticking for electric vehicle start-ups to raise capital. Car making is a capital-intensive and technology-driven industry. Early-stage development already requires significant investment. It’s better to be early than late to launch an initial public offering (IPO) to support subsequent capital needs from the secondary market.” Chinese EV car markers are also now faced with the challenge of fighting off foreign competitors, as the country lifted the ban on foreign ownership of local car ventures at the end of July.

Tesla is preparing to set up its “Gigafactory 3” in Lingang near Shanghai’s free-trade zone, with an annual capacity to produce 500,000 electric vehicles. “As soon as Tesla starts mass-producing in China, it will have a direct impact on domestic car firms,” Jia Xinguang, Executive Director of the China Automobile Dealers Association (CADA), told a public forum on the future of China’s EV industry in Shandong province. “There is only a window of three to five years for Chinese EV makers to come up with competitive products and services,” he added. The Chinese government forecasts there will be 2 million EVs on Chinese roads by 2020, and five years later, they will be accounting for a quarter of all car sales.

But years of massive government subsidies have led to overcapacity risks. Total production capacity had already reached 5 million vehicles by the end of last year, according to an estimate by China Automotive Technology & Research Center. The government is also phasing out subsidies, affecting the profitability of domestic EV makers, the South China Morning Post reports.

Even the China’s leading player in the sector, BYD, has been hit by the cut in government handouts. It said last month its net profit crashed 72% in the first half, which it blamed on the policy change. BYD said it will direct more resources into developing electric cars with longer driving ranges.

China’s auto sales fell for a second month in August on weak consumer demand but new-energy vehicles, with sales surges of nearly 50%, “have become the driving force for growth,” the China Association of Automobile Manufacturers (CAAM) said. In August, sales of NEVs soared 49.5% to 101,000 units, while production jumped 39% to 99,000 units. Sales of electric vehicles increased 31.7% to 73,000 units while 28,000 plug-in hybrid vehicles were sold last month, a jump of 130.8% from a year earlier.

China’s home prices rose at their fastest pace in almost two years in August, increasing the likelihood of more government tightening in the housing market. New-home prices increased 1.49% from the previous month, according to Bloomberg calculations based on data for 70 cities released by the National Bureau of Statistics (NBS). That compared with a 1.2% increase in July. It was the sixth straight monthly acceleration. Of the 70 cities, the biggest month-on-month price increase in August was a 3.4% gain in Wuxi. In Beijing, where still more tightening was announced, prices were unchanged; in Shanghai, they were up 0.1%.

The government is likely to maintain property curbs, based on fears that any relaxation will lead to another round of price surges, Zhu Haibin, Chief China Economist at JPMorgan Chase, said. Officials are seeking to keep housing affordable and limit the risk of destabilizing bubbles. “The government worries a lot. At this stage, there’s no intention to relax the housing tightening,” he said. For Zhu, the biggest worry in the housing sector is the diminished role of market forces in pricing and sales, as the government’s “temporary” administrative restrictions become permanent. Tightening measures – including purchase and resale curbs, increased down-payments and price caps – have been rolled out in 114 cities, according to brokerage CLSA. Despite this year’s price gains, China’s developers are facing their gloomiest outlook for eight years, weighed down by a squeeze on financing, a looming property tax and home-purchase curbs, according to Standard Chartered.

The property market remained lukewarm in some of the country’s biggest cities, however. Prices in Guangzhou and Shenzhen in Guangdong province, were up 0.9% and 0.5% respectively month-on-month. The coastal city of Xiamen experienced a 0.1% slump in prices for new homes in August, while its year-on-year rise was 0.3%. In 2017, the city had recorded the country’s lowest average rental yield of just 1%, according to a report by Shanghai-based E-house China R&D Institute. At that rate, investors could expect to wait 100 years to recover their initial investment if they relied solely on rent. Sanya and Haikou, the two hottest destinations in Hainan province not only for tourists but also for home buyers, posted month-on-month increases of 0.1% and 0.9% respectively, compared with a year-on-year surge of over 20%, the South China Morning Post reports.