Following China’s response to US $50 billion tariffs in Chinese imports announced by Trump last Friday, new threats emerged. Trump announced fresh Tariffs of 10% on $200bn Chinese goods if China “insists on going forward with the new tariffs”.
The escalating trade dispute between the United States and China keeps broader currency markets concerned. Currency markets generally dislike intervention. Both Chinese yuan and US Dollar dropped in early morning Asian trade on Tuesday and safe heavens like Swiss Franc and Yen were boosted.
Washington and Beijing escalate trade conflict after several trade consultations. Although they decided to put trade war “on hold” in May, the two largest economies of the world finally did not manage to agree. Their main dispute was over US trade deficit in goods with China and the Intellectual property protection. Intellectual property “theft” costs US almost $600 billion on a yearly basis.
Taking into consideration that China is not the only target of Trump’s tariff policy, the situation may become extremely complicated. However, some analysts support that Trump’s announcement was only negotiating card just to put pressure on China.
MARKETS after Trump’s announcement on fresh tariffs
The dollar was down against the Yen and Swiss Franc after Trump’s announcement on fresh tariffs on $200bn Chinese Goods. However, the US currency inched up 0.2% against its major traded rivals, close to a seven-month peak.
Safe heavens like Yen and Swiss Franc strengthened. The Japanese currency climbed 0.8 % against the greenback and the Swissie edged up 0.3 %.
The Canadian dollar edged down further, close to a one-year low of C$1.3237.
The Australian dollar dropped to a one-year low of $0.7380 amid US-China trade dispute.
The Sterling dropped to new 2018 lows ahead of BoE policy meeting this week, amid Brexit-linked concerns. The pound traded flat against the common currency.
The Euro dropped due to a dispute in Germany’s governing coalition and expectations the ECB will hold interest rates steady.
Sources: Reuters, Euronews, bbc.com
PLEASE NOTE The information above is not investment advice.