US and China to continue talks today – Commerzbank
|On Monday, representatives from the US and China met in London for trade talks. Prior to the meeting, it was reported that Chinese exports had increased by 5.4% in May. However, exports to the US slumped by over 34%, marking the sharpest decline since the start of the pandemic. The reduction in additional tariffs on Chinese exports to the US from 145 to 30 percentage points on 12 May was apparently too late to prevent this significant decline, Commerzbank's FX analyst Volkmar Baur notes.
International trade may remain erratic in the near term
"The US government is planning to withdraw or soften a number of export restrictions on US technologies in order to regain full access to rare earths and their products from China. Following the escalation of the trade dispute in early April (after Liberation Day), China introduced a licensing procedure for the global export of seven rare earths and their products. This led to a decline in exports, particularly of permanent magnets. In May, China reported a year-on-year decline of 5.7% in exports of rare earths, their compounds, and products, although this figure is an improvement on April's."
"Yesterday's talks ended without a resolution, but the parties intend to meet again in London at 10 a.m. British time today. Therefore, it is quite possible that a deal will be reached today that provides for the recent restrictions to be relaxed. It is also possible that US export restrictions introduced under the Biden administration will be withdrawn. This is likely to benefit the US dollar in the short term. However, one should not be fooled by such a minor deal."
"Even after today, the environment for international trade will be worse than before the current US president took office in January. Looking ahead, it is also likely that the political environment for international trade will remain erratic, and could continue to deteriorate structurally from an economic liberal perspective. This will likely contribute to continued high volatility on the currency market."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.