January 28, 2023

US – China trade dispute: The Empire strikes back

LQDFX news blog: US – China Trade Dispute: The Empire strikes back

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The US – China trade dispute is still alive and well. Trump’s administration recent threat for additional tariffs on $200bn Chinese products has once again come to the forefront.

On the 10th of July the US President announced the imposition of 10% tariffs on thousand Chinese goods. Last week the US Senate passed a bill in the opposite direction. But now Trump is expected to announce a 25% tariff on $200 billion of imported Chinese goods.

This move is interpreted as a lever for Beijing to step back regarding its trade policies characterized as unfair by the US government. The trading war between the two economic giants is raging. At the sound of such news the Chinese side said that “blackmail” would not work and that China is ready to strike back.

Although the tariff war unleashed by the US President on USA’s trading partners does not seem to work, Trump continues to defend it. According to a US Chamber of Commerce report the provision of aid to all US sectors hurt by retaliatory tariffs would cost $39 billion.

FED and BoE meetings are in focus this week.

Wednesday: FED (FOMC) will decide whether it will hike its rates next month by another 0.25%, i.e. the third hike this year. Experts expect hawkish rhetoric to calm down traders following Trump’s comments that a strong dollar “puts us at a disadvantage”.

Thursday: Traders widely expect that ‘The Old Lady of Threadneedle Street’ will raise interests from 0.50% to 0.75%. However, ongoing concerns about Brexit and economic weakness could keep GBPUSD from climbing above the psychologically-important 1.32 level.

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Forex Market in the middle of the US – China trade dispute

The escalation of US-China trade dispute led to buy into the dollar and sell currencies linked to China’s economic fortunes.

The Dollar inched up 1.0% against its major traded rivals, while it traded flat against the Yen.

The Euro dropped 0.1% against the greenback following the pressure caused by the US Dollar.

The Yen dropped almost 0.1% against the greenback following BoJ decision.

The Sterling was near to one-week low on Wednesday ahead of the BoE policy meeting widely expected to raise interest rates.

Oil prices headed lower as supply rises unexpectedly. Brent has dropped 1.4% pb while crude dropped 0.8% pb.

Gold prices edged down 0.1% for a third straight day due to a weakening global trend, ahead of FED meeting.

Sources: Reuters, CNN money, the guardian

PLEASE NOTE The information above is not investment advice.