Is There a Trade War Brewing Between China & the U.S.?

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Trade war with US boxing glove faces China boxing glove

Tension between the two biggest trade partners has intensified, as China announced its first of many retaliation against metals levies hours after President Donald Trump outlined new tariffs on $50 billion of Chinese imports.

China was not pleased and divulged a $3 billion tariffs on U.S. imports. U.S. stock futures dropped, signalling a further retreat for the S&P 500 Index after falling 2.5 percent. This escalation does not inspire confidence in the global scheme of trading especially in the case of  economic growth.

Suppliers to Apple Inc. were among the hardest hit in Hong Kong and mainland markets on Friday, as investors focused on potential losers from the trade spat.

Our analysts agree that China’s response is surprisingly modest in light of the U.S. actions, suggesting there could be a good deal more to come. And lest we forget that China is the largest foreign owner of U.S. Treasuries, therefore China has considerably more leverage over the U.S. some things President Trump is choosing to ignore.

China reportedly is set to pursue legal action against the U.S. at the World Trade Organization in response to planned tariffs on steel and aluminium imports. If China and the U.S. can’t reach an agreement on steel and aluminium trade following a public consultation period ending March 31, Beijing could begin collecting tariffs of 15 percent on imports worth $977 million, including fresh fruit, nuts, wines, denatured alcohol, ginseng, and seamless steel tubes. After evaluation, China could then implement tariffs of 25 percent on around $2 billion worth of product imports, including pork and aluminium.

We are concerned that a trading war could undermine the broadest global recovery in years. Meanwhile, business groups representing companies ranging from Walmart Inc. to Inc. are warning U.S. tariffs could raise prices for consumers and sideswipe stock prices.

We will be monitoring this one closely.

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