Trade War Fears Justified as China Responds with Force, Stock Markets Tumble

05 April, 2018, 00:59 | Author: Regina Lloyd
  • Sight for Sore Eyes       The start of April may be a welcomed change for Asian investors after a rocky March              Source Bloomberg

China plans new retaliatory tariffs against United States products including soybeans, in an escalation of trade hostilities between the world's two largest economies.

The early declines followed an announcement by the Chinese government that it plans to impose tariffs of 25 percent on a list of US goods worth $50 billion, including soybeans and aircraft.

"Now, we have a trade deficit of 500 billion dollars a year, with Intellectual Property Theft of another 300 billion dollars". While the dispute centers around a $375 billion goods trade imbalance in favor of China, the U.S.is also now targeting high-tech sectors that Beijing sees as the future for its economy, prompting an angry reaction.

According to The Street, "China is Boeing's biggest export market and the 737 is its biggest selling product".

According to economists, shrinking the trade gap between the two countries will prove hard, and in doing so Trump may risk a trade war between the two countries.

For weeks, in fact, President Donald Trump's aggressive trade actions have depressed the stock market.

As the trade conflict between the US and China intensifies, the markets continue to evidence investors' anxiety - starting the trading day Wednesday in the red across the three major USA indexes.

Beijing was responding to an announcement hours earlier by President Donald Trump's administration outlining proposed tariffs on 1,300 imported Chinese products, including industrial robots and telecoms gear, to protest Beijing's alleged theft of us technology.

In 2016, China imported $33bn worth of soybeans in total, with Brazil its biggest supplier with $15.5bn, according to ITC.




The US has announced a 60-day consultation period on the latest tariffs and China will not move in advance of any US implementation.

But investors relaxed as both sides emphasized a willingness to talk.

China will struggle to replace US soybean supplies after implementing an additional 25 percent tariff on American shipments, likely inflicting severe financial pain on domestic companies, analysts and executives at feedmakers said.

In fact, "we'll hardly notice because we sell so little overseas these days", he says. In 2017 alone, US footwear companies and USA consumers paid almost $3 billion in these hidden taxes.

Wang Shouwen, a deputy commerce minister, told reporters Wednesday that the long-range industrial strategy known as "Made in China 2025" is open to foreign companies, including American firms, and to private companies, not just state-owned enterprises.

"China's response carries both economic and political weight as agricultural states are major supporting regions for Trump", said Monica Tu, an analyst at Shanghai JC Intelligence Co.

The move went against the interests of China, the United States and the world economy, seriously violating the basic principles and spirit of the World Trade Organization (WTO). "While U.S. tariffs on all consumer goods average just 1.3 percent, they average 11 percent for footwear and reach rates as high as 67.5 percent".

The aggregate federal, state and local debt in the USA, both on balance sheet and entitlements, relative to levels of savings and investments in the economy, will contribute to worries over the longer-term purchasing power of the dollar, particularly in view of low current yields, Rule said. The US list includes Chinese products ranging from chemicals and diodes to motorcycles and dental devices.

The U.S. companies most at risk include Boeing, which past year sold one-fourth of its commercial airplanes to China, and several vehicle makers.

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