Trump Admin Prepares To Impose $267 Billion Tariffs On China

Trump Admin Prepares To Impose $267 Billion Tariffs On China
September 12, 2018

 

Trump has once again reiterated his intention to impose another US$267 billion of tariffs on China, which economists believe will adversely affect nearly every category of consumer goods. Trump has explained that the tax is planned to retaliate against China’s unfair trade practices. The latest statement has reignited fears of a full-fledged trade war, which Trump believes will result in the creation of more manufacturing jobs in the US.

 

Trade war, China’s concerns & economic data

The White House has slapped China with $50 billion worth of tariffs, and another $200 billion worth of duties is in the final stages. The last date for people to offer their views ended on September the 6th.  The US admin believes that the second round of tariffs will have an adverse effect on Chinese jobs and economy. However, the Chinese are not too concerned as they believe that the US cannot sustain this move for an extended period of time and will ultimately withdraw the tariffs to manage the inflation. The real concern for China is a potential joint attack by the US administration, Japan and EU on the country’s “State capitalism” that contributed to the economic success over the past four decades.

This was evident from the fact that the Chinese were closely monitoring the trilateral forum that took place between the US, EU, and Japanese officials after the fruitless China-US trade talks ended on August the 23rd. The primary objective of the trilateral forum is to fight the unfair trading practices by unnamed “third world countries.” China knows that it would be the center of the talks in the trilateral forum which has caused jitters in Beijing as a coordinated assault would have a substantial negative impact on the Chinese economy.

In the past few months, the EU and Japan have joined hands with the US in launching complaints against China in WTO. Those complaints were mainly related to “forced technology transfers” in China through compulsory joint collaboration framework with domestic partners.

In May, the U.S. Trade Representative, Robert Lighthizer, EU official Ms.Malmstrom and Hiroshige Seko, Minister of Economy, Trade and Industry issued the following joint statement “No country should require or pressure technology transfer from foreign companies to domestic companies through the use of joint venture requirements, foreign equity limitations, administrative review and licensing processes.”

Beijing is concerned that Trump has worked out an effective trade strategy to counter it. Trump’s decision to impose another round of tariffs on Chinese goods has increased uncertainty in the global trade arena. This is strengthening safe-haven assets such as the US dollar, gold, the Swiss Franc and the yen.

On the economic front, the Commerce Department reported yesterday that the U.S. wholesalers restocked at a quicker pace in July. Wholesale inventories rose by a seasonally adjusted 0.6% m-o-m in July, meeting the expectations of analysts polled by The Wall Street Journal.

The Labor Department, similarly, reported record job openings in July, mainly driven by an increase in vacancies for manufacturing and finance.

Vacancies surpassed those categorized as unemployed by 659,000 for the reported month, an unexpected trend that began in early 2018. Openings increased by 117,000 from June to 6.94 million and relative to last year, the opportunities have increased by 737,000 or approximately 12%. The uncertainty caused due to US-China trade issue and strong US economic data has turned the greenback strong against its counterparts.

The U.S. Dollar Index (USDX, DXY, DX), an index that measures the value of the US dollar relative to a basket of foreign currencies, has strengthened following the strong economic data.

USDXY - technical analysis - 12th September 2018

The US dollar index closed at 95.24, up $0.14 or 0.14% from the previous close and the economic data and trade uncertainty favors further uptrend.

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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