China could widen curbs on Japan’s imports, rare earths if tensions worsen: Morgan Stanley

Morgan Stanley reports that China may escalate trade restrictions against Japan if tensions worsen following a November dispute. Potential measures include anti-dumping investigations into Japanese imports, expanded export bans (possibly including rare earth metals for civilian manufacturing), and discouraging consumption of Japanese goods. This warning follows a speech by Japan's Prime Minister regarding potential military response if China attacks Taiwan. While Morgan Stanley's "baseline scenario" anticipates no further escalation, they acknowledge China possesses unused leverage. The report highlights that sectors like autos, electronics, chemicals, and consumer goods in Japan could be negatively impacted by such actions. The bank suggests any export bans would likely be temporary due to integrated supply chains.

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