U.S. Trade War with China and How it Affects the Market

us and china trade containers crashing

With a decrease in the value of their currency, the yuan; an increase in the value of the Japanese yen; unpredictable shifts in treasuries and a decline in U.S. stocks, the trade war has taken a toll on both countries and the export and import of various goods. Learn more here.

CHINA AS A SUPERPOWER

China continues to solidify its status as a national superpower through the progressing trade war with the United States. With a decrease in the value of their currency, the yuan; an increase in the value of the Japanese yen; unpredictable shifts in treasuries and a decline in U.S. stocks, the trade war has taken a toll on both countries and the export and import of various goods. If the two nations fail to come to a mutual standstill, then the trade war could possibly cause a large economic blow to both sides of the global hemisphere.

Well-imported items from China, including wooden cabinets and shrimp, have dipped. Additionally, since last February, China exported the lowest amount of aluminum, a negative hit to the nation considering it holds the title of the world’s largest producer of the element. While China’s imports show a steady decline to approximately $43 billion per year, Mexico’s imports continue to increase by about 5.5%, or roughly $12.4 billion. In other words, Mexico has significantly boosted their supply of exported goods to America as a result.

Since last December, China has added over 100 tons of gold to their reserves, which has no doubt increased their buying power in the collection of precious metals. It is rather important to note that “given strained relations with the U.S., China needs a hedge against its large holdings of the dollar, and gold serves that function.” Due to the shrinking U.S. trade deficit with China, exports have climbed to an all-time high.

DOMESTIC EFFECTS OF THE TRADE WAR

As a result of the trade war, experts predict that the global economy will slow down in growth, similar to that of the last financial recession. With less investment in China and rising taxes, restructuring of global supply and demand is plausible and could cause even more damage to business investment and trade in the global economy in the near future.    

Over the past year, U.S imports of Chinese goods fell 12.5%, a substantial decrease which shows that U.S. President Donald Trump’s trade war fails to improve the bilateral relationship between the two superpower nations. Ultimately, the impact of America’s failing relationship with China negatively affects the working-class and domestic economy. China’s counter-tariffs, for instance, take aim at U.S. farmers who will likely see significant drops in crop and meat prices due to low product exports.  

By implementing taxes specifically targeting farmers, President Trump will undoubtedly see a shift in support from key pro-Trump farming swing states like Iowa and Wisconsin in the upcoming election. If he wins the trade war against China, then one of his biggest consequences could be losing his battle against the Democratic Party for the White House.

DISCUSSIONS ON A MUTUAL AGREEMENT

Although the U.S and China have been talking about a mutual limited time agreement on the status of the trade war, there have not been any official plans to make amends. There has, however, been a plan proposed to move forward to end the trade war by the U.S.

Currently, administration officials in the U.S. have brought forth a three-phase plan to make China purchase a considerable amount of agricultural and energy exports and to partially reduce U.S. taxes. Chinese officials are reluctant to accept the proposal, and if they choose to discontinue their participation in the trade talks, then neither nation will not be able to move forward.  

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