Asian markets feel pain as trade war escalates. Europe gets a break
- Author: Zachary Reyes May 25, 2019,
May 25, 2019, 10:26
That's White House economic adviser Larry Kudlow on Sunday offering a "both sides" take in an interview on Fox News. And so when Trump chose to rise - to raise the tariffs this last Friday on $200 billion worth of Chinese imports into the U.S., China was sort of - I think that the government was a bit uneasy about what to do next.
The two countries are sparring over USA allegations that China steals technology and pressures American companies into handing over trade secrets, part of an aggressive campaign to turn Chinese companies into world leaders in robotics, electric cars and other advanced industries. It said specifically that oil and gas workers in Texas, Oklahoma, and Louisiana, as well as farmers across the country will feel the sting from the Chinese tariffs.
The response was announced after Trump on Monday warned Beijing not to retaliate. "China trade talks coupled with continued provocative tweets from President Trump provides no relief for risk sentiment as we look to another weak start to the week for Asia markets", Jingyi Pan of IG said in a commentary.
And while China is not paying the cost of the tariffs, their impact on US consumers may not be as bad as some observers predict.
Last July, Trump began gradually slapping tariffs on Chinese imports. That would mean another $325 billion in taxes on goods made in China. And Trump said Monday that he expects to meet Chinese President Xi Jinping in late June at the G-20 summit in Osaka, Japan.
In its earlier rounds of tariffs on Chinese products, the administration tried to limit the effect on American consumers by focusing on so-called intermediate goods - imported components that US companies use to make finished products. We're looking at chemicals, liquor and thousands of other products that the USA exports to China.
According to CNBC, as of June 1, Beijing will increase tariffs to as high as 25 percent on more than 5,000 products.
All three major US indexes closed in the black, although they pared gains late in the day and clawed back less than half of Monday's losses, which were the largest one-day percentage drops in months.
Beijing has so far imposed tariffs on $110 billion worth of American goods in retaliation to the USA duties.
Prior to the market open, the People's Bank of China (PBOC) lowered the official midpoint of the yuan's daily trading band to 6.7954 per dollar. "It's the American importers, the American companies that pay what, in effect, is a tax increase and oftentimes passes it on to USA consumers".
The standoff with China over trade is compounding the strain of five years of falling commodity prices and losses from spring flooding.
Asian shares took another beating on Tuesday but closed off their lows, following the more upbeat tone from USA and Chinese officials.
China's explosive rise was a shock to the global trading system. "We need a trade deal done soon, and in the meantime farmers are probably going to need another round of aid payments", said Kimberley, who is also the director of market development at the Iowa Soybean Association.
The latest bullets in the U.S. A US importer could, for example, seek a discount or a payment from the Chinese exporter to offset the cost of the tariff.
I hate to agree with the president's efforts on most matters, but this attention on China appears to be a valid one.
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