Trade war in a lose-lose situation for both China and the US- ING


Iris Pang, Economist at ING, points out that China has eventually retaliated with tariffs but this retaliation is far from the last. They expect American companies to be included in China’s unreliable entity list and think USD/CNY could move closer to the 7.10 level or even cross 7.10 briefly. 

Key Quotes: 

“China has just announced it will impose 5% to 10% tariffs on $75 billion of goods (including frozen pork and nuts) along with resuming the 25% duty on US automobiles and auto parts from 15th December. Some tariffs will come into effect on 1 September while others will kick in around 15 December. What's interesting to note here is that the market was not expecting this tariff retaliation given that China did not immediately react to the 10% US tariffs on $ 300 billion goods and President Trump's unexpected tariff delays to 15 December.”

“But even though China's tariffs are smaller than what the US has imposed, the sudden surprise element of it all should cause a risk-off to asset markets globally.”

“As China has allowed USD/CNY to cross 7.0, we think it is possible that this tactic is reused to weaken the yuan further to surprise the market again. We expect USD/CNY to move closer to 7.10 level or even cross 7.10 briefly if the trade talks in September don't make any progress like the last round.”

“If the US retaliates harshly, then we expect China to really kick off its unreliable entity list. But if it doesn't, it will be on the back foot during the upcoming trade negotiations in September - and given President Trump's latest tweets, that seems improbable. In our view, one thing is for certain, this is a lose-lose situation for both China and the US in this trade and technology war.”
 

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.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD extends recovery beyond 1.1050 on Saudi output headlines

News indicating that Saudi Arabia’s oil output would return to normal quicker than expected, lifted the market’s mood and weighed on the greenback. EUR/USD underpinned by improved Business Sentiment according to the German ZEW Survey.

EUR/USD News

GBP/USD rallies past 1.2500, reaches fresh multi-week highs

The GBP/USD pair is trading above the 1.2500 figure, getting a boost from easing demand for the greenback following relief news related to the crude oil market after the weekend attack to Saudi facilities.

GBP/USD News

USD/JPY drops back to recent range after hitting fresh 6-week highs

The USD/JPY pair spiked to 108.35, reaching the highest intraday level since August 1st and then pulled back to the 108.15/20 area.

USD/JPY News

Gold struggles to find direction, trades in tight range near critical $1,500 handle

The XAU/USD pair struggling to make a decisive move on Tuesday and continues to trade in a relatively tight range around the $1,500 handle.

Gold News

Saudi Arabia's oil output to be fully back online in next 2-3 weeks

Citing two sources briefed on the Saudi oil operations, Reuters reported that Saudi Arabia's oil output would return to normal levels quicker than initially thought.

Read more

Forex MAJORS

Cryptocurrencies

Signatures