Trade War: What is it good for? - AmpGFX

The long-awaited next batch of US tariffs on Chinese goods has been announced and the debate will continue over how much these tariffs will affect commerce and economic activity in China, the USA and the rest of the world, according to Greg Gibbs, Analyst at Amplifying Global FX Capital.

Key Quotes

“The broader message is that the US administration appears to have a firm policy of attacking what it sees as unfair trade and industry policy in China and is happy to use the blunt tool of tariffs.  This points to a long-lasting threat to industry in China and additional inflation risk in the USA.”

“The Chinese economy is already facing challenges as it deals with excesses in its domestic financial system.  The potential disruption to global supply chains may impact on global trade and global growth.”

“Rising US interest rates and yields appears to have contributed to financing troubles in several emerging market economies.  The tariffs may place further upward pressure on inflation expectation and yields in the USA, with negative feedback to the global economy.  As such, the US tariffs policy should tend to undermine confidence in Asian and other emerging market economies.”

“The risks to China may increase if the USA now pursues a more closed NAFTA agreement that tends to discourage Chinese investment and trade into Canada, Mexico and the USA.  The US administration may also use inducement of better trade relations with the EU and other nations if they support its actions to pressure China to reduce its state support for strategic industries.”

“The twists and turns from here may continue, and the risk is high that an on-going trade war plays badly for business confidence in China, the USA and globally.”