The dramatic opening shots in the U.S-China Trade War have been fired but this next part is the real meat of the story and why the whole of Wall Street has ‘its knickers in a twist.’
On the 22nd of March, U.S President Donald Trump announced his plans to impose taxes on $50 billion worth of Chinese exports to the U.S. Beijing was very swift in its comeback, outlining their own plans to impose taxes of their own on $3 billion worth of U.S products.
This ever-rising antagonism suggests that the Trade War situation could, and is highly likely, to continue to escalate. President Trump very firmly stated, and I quote unquote here, that this ‘first blow’ against China was “the first of many.” Beijing, again very swift in their reply said that “it is impolite not to reciprocate” and more or less promised President Trump they would “fight to the end.”
Analysts are very concerned, and with them so are the markets. China’s response on Friday was filed under ‘vengeance’ for the aluminum and steel tax plans President Trump unveiled earlier this month. Just looking at the above back and forth, a second blow is probably well on its way. If that stands and President Trump does indeed unveil more plans for punitive measures, again just by looking at the above comments we can be almost certain Beijing will respond. After all, “it is impolite not to reciprocate.” You see the aggressive back and forth here, right? This pattern of retaliation? This is exactly what economists call a Trade War. But the main source concern for every trader, analyst and economist out there is the “lingering uncertainty over what happens next.”
To be honest, in a Trade War there are no winners, especially when we’re talking about the world’s two biggest economies. But the truth is, no one should have really been surprised by President Trump’s stiff stance. He has always been very consistent with his idea of trade, for years if not decades now. He campaigned on it and according to Chief Investment Strategist, Mark Luschini, “we’re getting what we were told we were going to get.” Nothing less, nothing more.
And it’s exactly how President Trump has phrased it too – just actions as part of this negotiation. The typical stance of ‘it’s not personal, just business’ – and it pretty much is but to be frank, looking at how much of a leg up current trading practices have given Chinese companies, it’s highly unlikely they’ll give in to President Trump’s demands, or at least they won’t do so without putting up a decent fight.
The million-dollar question is: are the actions President Trump has taken enough to gratify, not only him but his supporters, or is Wall Street rightfully on pins and needles? Many analysts suggest, Trade War is just a synonym for Great Depression, so having said that, no matter who you are or what you do for a living, this should worry you.
Stay tuned as we follow the Trade War saga.
This article is for educational and informative purposes only and should not be considered as investment or trading advice.