Talking Points:
- The China-US trade war is cresting and new concerns are rising elsewhere – mainly in FX markets.
- USD/CNH[1] has gained over +9% since its yearly low, effectively neutralizing any impact from the Trump tariffs.
- The agreement with the EU means that the Chinese front of the US trade war is likely to intensify over the coming weeks.
What Led to This Stage of the US-China Trade War?
The global trade war pursued by the United States under President Donald Trump is shifting into a new phase. It’s become evident that US Treasury Secretary Steve Mnuchin’s comments back in May that a trade war was “on hold” were nothing more than a diversionary tactic: the trade war is fully-on, and it’s been ‘on’ for several months.
The most recent phase of the trade war was marked by an escalation of tit-for-tat tactics between China and the United States. On June 15, US Trade Representative Robert Lighthizer announced a 25% tariff on $50 billion worth of Chinese goods. Then, on July 10, after being asked by US President Trump for a list of Chinese goods that could be hit with additional tariffs, the US Trade Representative outlined a new list of $200 billion worth of Chinese goods that would be eligible for 10% tariffs.
But the caper came just last week on July 20, after China had announced tariffs on US agricultural products. In response, US President Trump said he is prepared to slap tariffs on all goods imported from China; in 2017, the US imported just over $500 billion of goods from China (the net trade balance is around $300 billion). In essence, we’ve arrived at the
