Renewed U.S.-China trade spat boosts safety demand for yen

Ivan Schwartz
June 20, 2018

"This latest action by China clearly indicates its determination to keep the United States at a permanent and unfair disadvantage, which is reflected in our massive $376 billion trade imbalance in goods", Trump said about China's retaliatory tariffs.

Shares of Boeing, which has acted as a proxy for trade war tensions with China as it is the single largest US exporter to the country, fell 3 percent, weighing the most on the Dow. In a forcefully worded statement, it said Beijing is ready to "defend the interests of the Chinese people and enterprises".

US stock markets are opening sharply lower Tuesday as tensions over trade between the USA and China seem closer to a boil.

It gave no details.

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"China has been trying to avoid an ugly outcome of the US-China trade conflict", said Mr Lu Ting, chief China economist at Nomura Holdings in Hong Kong, adding that the country left some "wiggle room" for future negotiations. The Nasdaq and the S&P 500 futures are also pointing lower before the opening bell.

Other countries have learned from Japan's experience, Huang said, alluding to the Asian giant's historical trade tensions with the U.S., which cooled off only after Tokyo accepted quotas on exports to the USA, reduced its import tariffs and allowed its currency to appreciate. But the rhetoric is intensifying, with Trump lashing out at Beijing over its threat to retaliate against the administration's latest proposed tariffs.

This is what a trade war looks like. "The economics already seemed tight, so I can't imagine you could stack both those tariffs and continue manufacturing competitively in the U.S".

But with only $130 billion of imports from the U.S. a year ago, how would China hit back?

American businesses from Apple and Walmart to Boeing and General Motors all operate in China and are keen to expand.

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Chinese regulators also have the option of broadening their retaliation by tying up American companies in tax or anti-monopoly investigations or by denying or revoking licenses.

As Louis Kuijs of Oxford Economics notes, a large share of China's exports are for USA companies that sell products here at home.

And now the president is warning the USA may impose tariffs on a total of $450 billion of Chinese goods. The Philadelphia Semiconductor index.SOX fell 1.2 percent.

Over all, European companies found China to be a harder place to do business than the year before because of problems like regulatory barriers and limits on market access, the report said. GTM Research also projects an oversupply in the market based on recent policy changes in China that will constrict the country's demand.

Trump has taken direct aim at Beijing's industrial policies by targeting tariffs at goods the White House benefit from them. He said the move would be in retaliation for China's decision to raise tariffs on $50 billion in US goods.

The first round of penalties announced by both nations is set to take effect July 6.

Europe, Japan and other trading partners raise similar complaints, but Trump has been unusually direct about challenging Beijing and threatening to disrupt such a large volume of exports.

"That would lift to 10 per cent if Mr Trump followed through with his threats", Dr Oliver said.

According to Zimmerman, Beijing was likely to slow down approvals for United States investment and deals would "end up being kicked around like a political football as we have witnessed with the Qualcomm/NXPI transaction [which is still under review by the Chinese authorities]".

Other reports by GizPress

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