US-China Trade War: Officially Underway

President of the United States, Donald Trump, has just launched 25% tariffs on $34 billion worth of Chinese goods on Friday (7/6), including electronic devices, aircraft parts, and machinery. The President believes that it is one of the best ways to cut the trade deficit between US and China, and to protect the domestic economy. In response to Trump’s decision, China enforced their own tariff policies, which is also $34 billion worth of U.S. goods.

On Wednesday (7/11), Trump has threatened to hit another $200 billion worth of Chinese exports with a 10% tariff as a result of Chinese retaliation to his preliminary action. “For over a year, the Trump administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition,” said U.S. Trade Representative Robert Lighthizer. “There is no justification for such action,” he added. The act of counterattacking each other furthered the trade war that has been going on since January this year.

In retaliation for Trump's actions, China promised to counter the plans of the U.S government. “China would never start a trade war, but if any party resorts to an increase of tariffs then China will take measures in response to protect development interests," said Chinese Premier Li Keqiang. China also plans to file complaints to the World Trade Organization, calling the US threat to add the tariff "totally unacceptable".

Trump's latest trading policy certainly ignited big reactions to the global market in trading in financial markets in various countries. The US dollar rose against all major currencies as protectionism pushes traders toward safer assets and now Treasury yields look attractive. Meanwhile, European stocks has sunken as much as 1.3% with more than 500 members of the STOXX Europe 600 Index trading below the dollar index making their stocks in a worse position.

The yuan weakened further, falling as much as 0.7% against the US dollar. Stocks across China slumped, Hong Kong's Hang Seng Index was down 2% while the Shanghai Composite fell 1.8% and Japan's Nikkei 225 index fell 1.7%. Stocks in Korea, Taiwan and Austria also ended lower. US Mining companies were the most harmed in this trade policy making as base metals hit multi-month lows. Investors were prominently worried about the impact of tariffs on global growth and demand for raw materials.

Sources:

BBC

Bloomberg

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