The additional 15 percent in levies exacerbate “the uncertainty in the global trading environment” as well as “negatively affects global sentiment and adds to risk aversion globally,” Michael Taylor, a Moody’s managing director and chief credit officer for Asia Pacific, said in an emailed comment as cited by media.

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“The higher tariffs could also lead to the repricing of risk assets globally, tighter financing conditions and slower growth,” he said.

The analyst further added that the increased tariffs would have a “significant” effect on China in particular as the measure would hinder private investment decisions.

The warning came as Beijing and Washington try to hammer out a trade deal to avert further escalation of their trade war after the US announced that import duties on Chinese goods will be raised from 10 to 25 percent. The hike comes into effect on May 10. China has already vowed to take “necessary countermeasures” in response.
While Moody’s still hopes that a trade deal will be reached, it says the risk of “a complete breakdown” in trade negotiations “has certainly increased.”

Hope for a last-minute agreement between the US and China mostly strengthened Asian stock markets on Friday. The benchmark Shanghai Composite index advanced 3.1 percent, while the Shenzhen Composite Index gained more than 3.8 percent. Another benchmark, Hong Kong’s Hang Seng Index, was up nearly one percent. However, Japan’s Nikkei closed with losses of 0.27 percent, while Taiwan TAIEX and Indonesia JAKIDX also slid.

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