January 28, 2023

Boom! Trade War has just begun > Highlights

Boom! Trade War has just begun

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Boom! USA-China trade war has just got real! Starting today, the two economic giants are imposing billions of dollars in tariffs on each other.

The Trump administration’s 25% tariffs targets more than 800 Chinese products worth $34 billion, including industrial machinery and auto parts.

China kept its promise and did not “fire the first shot”. However, Chinese 25% tariffs on U.S. goods, such as cars, soyabeans , pork and cotton went into effect immediately after U.S. made its move. China claimed the US is triggering “the biggest trade war in economic history.” China’s commerce ministry called the U.S. actions “a violation of world trade rules”.

And this seems to be true as Trump warned that within weeks may slap tariffs on more Chinese goods, and China has vowed to retaliate. Trump administration invokes that they do it as they want to pressure China to abandon unfair practices, such as intellectual property theft.

Both countries have also issued a second batch of proposed duties on $16 billion of each other’s goods. These would hit U.S. energy exports, such as coal and crude oil, but is unclear when these will come into effect.

Concerns over Trade War

Experts express fears that a prolonged and escalating battle would harm global trade, investment and growth.

European Union Trade Commissioner Cecilia Malmstrom said in a tweet on Friday:

START TRADING

CURRENCY MARKETS following the Trade War beginning

The instant response among major currencies on Friday was in general limited, as trader were aware and expected the “event”.

The dollar dropped following the launch of the US-China trade war. The dollar index dropped 0.2% against his six major traded rivals after weakening to 94.177 the previous day, its lowest since June 26.

The Australian dollar, a liquid proxy to China-related trades, rose 0.3%.

The Japanese yen, usually a safe-haven currency during times of economic and political instability, traded flat against the dollar.

The Sterling rose ahead of a meeting regarding Brexit.

The Euro rose to $1.1727, its strongest since June 26, mainly supported by the greenback’s respective fall. The euro is enjoying a boost from strong German industrial orders and Washington’s temporary softening stance towards EU automakers.

Oil prices fall due to higher supply from Saudi Arabia amid fears over USA-China trade dispute.

Sources: Reuters, CNN, bbc.com

PLEASE NOTE The information above is not investment advice.