U.S. trade protectionism has started through 2018 with an increasing focus on China. The great trade war will affect not just the Asian markets but also the Global markets. Till now, the U.S. has imposed tariffs on $250 billion of imports from China to which China has strongly reacted with tariffs of its own on $110 billion of U.S. imports. A trade war between two great economies is a great deal to worry about especially for Asia, which is home to some of the most open economies in the world. Here is FinanceShed take on the US-China Trade war and its effect on the Asian Market.
This trade dispute and the fear of higher tariffs have rattled the investors and market as a whole. There is a huge level of uncertainty in the markets of the economy as the long-running rule-based trading systems have been neglected which would be a historic breakdown with a threat for jobs, growth, and stability around the world.
China’s economic growth has declined 6.3 percent which is a considerable one and cannot be neglected at any cost. As per the analysis of this trade war, U.S. president Trump has given another reason for trade decline because of China trade negotiations amid Beijing’s attempt to renegotiate. He also mentioned in his tweet about imposing 25% tariffs on an additional $325 billion of Chinese goods “shortly.”
Also, China is canceling its trade talk of negotiations with the U.S., bringing a piece very bad news for risk assets and would slow the prospect of global growth recovery. Many companies of this country are ready to trade at the lowest margin possible which can also affect product pricing at a global level which will affect the profitability and investors perception.
The Ultimate Effect On Asian/Global Markets
The Shanghai market fell 5.58% and the Shenzhen component dropped 7.56%. The Shenzhen composite also fell 7.381%. The CSI also declined 5.84% which indicates that some serious issues are going on. The Hang Seng index also dropped 2.90% because of the telecommunication companies of China which were listed here and which fall flat.
The Australian Dollar also falls to $0.6993 which rose to $0.704 last week. This country is facing a major effect being China’s largest trading partner. Oil prices declined in the afternoon of Asian trading hours, with the international benchmark dropping 1.78% to $69.59 per barrel.
For most of Asian Nations, both the countries China and the U.S. have a great implication on their trade for both imports as well as export. Asian countries will be the ones to suffer the most because of this trade tension going on as they are majorly the developing economies and the trade dispute will slow down the rate of their development. The coming political scenario indicates that America’s desire of becoming the trade leader will outweigh the economic incentive to seek a compromise or a solution that both sides could frame as a win.
It should be considered that this decision of the U.S. president not only affected the trade relation with China but the increase in tariffs of steel and aluminum also affected the bonds with other counties, creating a major threat of losing some old allies.