The escalating US-China trade dispute came at the forefront of events in world markets after US President Donald Trump announced on Thursday his sudden new plan to approve a 10 percent surcharge on Chinese goods worth 300 billion US dollars.
This was after a month-long truce between the two countries and industry associations protested against the plan, including the American Chamber of Commerce, the National Retail Federation, the American Apparel and Footwear Association and the Consumer Technology Association.
Donald Trump asked Robert Lighthizer, the current US Trade Representative, to call China and warn it of additional tariffs in a surprise decision which came at the end of a meeting with senior advisers on trade negotiations with China to threaten the adoption of new tariffs from the beginning of September after failing latest negotiations in Shanghai to reach any agreement.
The US president also threatened China with tougher measures and higher tariffs if Chinese President Xi Jinping did not move more quickly to reach a trade agreement between the two countries.
The Chinese Foreign Ministry announced that Beijing would be forced to take countermeasures if the US insisted on additional tariffs on Chinese goods.
They stressed that the Chinese government does not want a trade war but is not afraid to fight such a war while the additional fees do not include goods worth $250 billion which is already subject to fees estimated at 25 percent.
This announcement of new tariffs led to an escalation of the trade war between the world’s largest economists, a shake-up in global financial markets and the expansion of tariffs approved by the US president to include almost all Chinese goods imported by America marking the end of a truce in the dispute. The year-long trade has affected global growth by slowing down disrupting supplies from oil and electronics to even grain.
The US president said the new tariffs were merely a tax paid by China and could be increased in stages to more than 25 percent while constructive talks were continuing to ease unrest among the world’s two largest economies.
China has lost its status as the largest trading partner of the United States due to the adoption of additional tariffs by the United States on Chinese imports and this has slowed bilateral trade between the two largest economies in the world.
According to the China Times, data released by the US Department of Commerce at the beginning of the week revealed that during the first six months of this year, imports from China to the United States fell by an estimated 12 percent while US exports to China fell by 18 percent.
In sharp contrast to US President Donald Trump’s promise to reduce the trade deficit, the deficit in goods and services rose 7.9 percent year-on-year in the first half of this year.
According to the researcher of the Academy of International Trade and Economic Cooperation, Liu Jianping, the figures reveal that America is more affected by the pressure of trade war than expected while China has more flexibility than America and the reason is due to its diversified trade structure.
Liu added that the impact of trade war on the economy is in control. China’s imports and exports increased by 9.7 percent with the Belt and Road participating countries driving the overall growth of exports and imports by about 2.7 percentage points.
Xu Mingqi, vice-president of the Institute of World Economics at the Shanghai Academy of Social Sciences noted that even so, US importers still have to import Chinese goods because some are indispensable and others cannot be offset by a short-term alternative.
US President Donald Trump said Saturday that things are going well with China, insisting that American consumers do not bear the burden of tariffs on Chinese imports.
He tweeted: “Things are going along very well with China. They are paying us Tens of Billions of Dollars, made possible by their monetary devaluations and pumping in massive amounts of cash to keep their system going. So far our consumer is paying nothing – and no inflation. No help from Fed!”
Oil prices plummeted as most of the global markets fell during trading on the stock market amid concerns about the growth of the global economy after the decision of US tariffs and escalation of trade war between the two largest economies in the world.
US stock indexes fell at the open on Friday, affected by the performance of the technology sector which is affected by additional import tariffs in China and the sharp escalation of the trade war between Washington and Beijing while weak domestic job growth in last July sparked fears of economic slowdown.
The Dow Jones Industrial Average fell 54.76 points or 0.21 percent to 26528.66. The Standard & Poor’s 500 Index was down 9.66 points or 0.33 percent at 2,943.90. The Nasdaq Composite Index was down 54.70 points or 0.67 percent at 8,056.42.
The Stoxx 600 index fell more than 1 percent to continue the loss which reached 2.5 percent last Friday, the worst daily performance since the beginning of this year while the DAX German index fell by 1.55 percent while the British FTSE 100 fell by 2.24 percent.
The Nikkei ended the day down 1.74 percent and the Shanghai Composite Index fell 1.62 percent.
Moscow Stock Exchange
The Russian stock index fell in the footsteps of global markets.
Gold prices jump as trade war rages
On the other hand, prices of the precious metal jumped more than one percent to its highest level in more than six years on Monday with the outbreak of trade war between Washington and Beijing as well as global growth fears that pushed investors to safe-haven assets.
The yellow metal rose 1.1 percent to $1,456.51 an ounce after hitting a six-year high of $1,459.47 earlier in the session.
Gold futures in the United States rose 0.8 percent to $1,468.50 an ounce.
For other precious metals, silver rose 1.9 percent to $16.51 an ounce while platinum rose 1.4 percent to $854.33.
Falling oil prices
US President Donald Trump’s announcement extends US tariffs to almost all Chinese imports while China has pledged to respond to Donald Trump’s decision, a move that ended a month-long trade truce. Primary commodities such as oil.
Crude oil prices are expected to remain in turmoil this week after rising at close at the end of last week by nearly 3 percent while losing on a weekly basis by about 2.7 percent.
Oil prices fell on Monday on fears of falling crude demand after the US president said he would impose additional duties on Chinese imports.
Brent crude futures fell 92 cents or 1.5 percent to $60.97 a barrel.
U.S. West Texas Intermediate (WTI) crude futures were down 73 cents or 1.3 percent at $54.93 a barrel.
Global benchmark and US crude fell last week with global benchmark falling 2.5 percent and US crude down 0.1 percent.
Asian stock markets fell to their lowest level in six months on Monday while yellow metal prices rose as investors moved to buy assets as a result of the escalating trade war between the world’s two largest economies, the United States and China.
The dollar increases its losses and the yuan is falling
The dollar fell against most of its major counterparts in today’s trading as the US-China trade war escalated following reciprocal measures between the two countries.
The cost of trade war led by US President Donald Trump on China is witnessing a huge escalation as China has devalued its currency, the yuan, and asked state-owned enterprises to suspend imports of US agricultural products.
The move comes in response to what US President Donald Trump said last week that he would approve a 10 percent surcharge on Chinese goods and products valued at about $300 billion as of September 1 and also said he would increase tariffs again in the absence of Chinese President Xi Jinping has moved faster towards a trade agreement.
China’s currency manipulation rating
US Treasury Secretary Stephen Mnuchin said in a statement Monday that the US government has decided to consider China a manipulator in its own currency and will discuss it with the International Monetary Fund to eliminate unfair competition from China.
The US plan comes after China let its yuan currency fall below the level of seven dollars for the first time in more than a decade, a sign that China is likely to allow the yuan to fall further because of the escalating financial crisis.
The New York Times said that the same step will not change the trade relations between Washington and Beijing but the shift represents a new line in the economic conflict between the two countries where US President Donald Trump and US officials has long criticized China for manipulating its currency to help exporters and if the currency continues to decline, the Trump administration is likely to see that in retaliation for the increasing tariffs is approved by the White House.
The US Treasury Department said a statement by the People’s Bank of China, on Monday, indicated that the Chinese authorities control the exchange rate of the yuan.
The People’s Bank of China said it would continue to take important and targeted measures against such behavior that could occur in the foreign exchange market.
They added that this is an explicit recognition by the People’s Bank of China that has a lot of experience in manipulating the Chinese currency and that they still have the willingness to do it frequently.
The Treasury explained that China has violated a binding agreement not to devalue the currency for the purpose of influencing competition within the G20.
As the yuan fell, its impact was driven by the rising cost of China’s oil imports denominated in US dollars.
Today, prices are under great pressure due to the signs of the rise of oil exports to the United States and the US Census Bureau figures on Friday revealed an increase in US oil exports by an estimated 260 thousand barrels per day in June to a record monthly level of 3.16 million barrels per day.
Victims of the trade war
The negative effects of the escalating trade war between the United States and China extended to many markets around the world which also included the sectors of technology and mining and more recently, private aircrafts.
According to Bloomberg, British airline company BBA Aviation which operates more than 200 private aircraft stations in the world, is still recording a decline and attributed it to several reasons but most notably from the escalating trade war between Washington and Beijing. Data shows that its shares fell by 5.9 percent, the largest in 5 months.
The British company said in a statement that the uncertainty about US tariffs, the turmoil in the Gulf region and the slowdown in China continues to affect business confidence.
The company has become one of many companies that have spoken of mounting unrest between America and China in its latest business data.
Apple and Huawei pay for the trade war
The technology sector is one of the biggest sectors affected by the escalating trade war between the United States and China, especially Apple and Huawei.
The trade war began in January when the United States banned ZTE and Huawei products on its territory, claiming that the phones belonging to those companies do not give adequate protection of data and allow spying on its owners.
According to the website dazeinfo, when Apple announced its total revenue for the last three months of the year, it found that about 20 percent came from China where revenue reached nearly $17.95 billion and this was in the second three months in which Apple saw tremendous growth in the Chinese market which has remained in great position.
The site pointed out that China wants the United States to taste the bitterness of the drug itself by banning Apple on its territory where it represents a huge market and accounted for nearly 40 percent in the first three months of this year and the ban of their devices is a severe blow to the United States.
Apple is facing a major threat from China which could negatively affect its sales and profits in light of the expectations to ban its products in the Asian country including the iPhone which sold in China more than 243 million units in 2018.
It seems that the trade war between Washington and Beijing will remain in the light of conflicting statements about the fate of this trade war.
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