Although both the United States and China have publicly stated willingness to avoid a trade war, some of the recent news tells a different story. Although the previous week was relatively stable with no escalating tensions between the world’s two largest markets, there are some analysts that believe China is starting small, and that there could be more significant tariffs to come in the future.
A long and drawn out trade war could damage investor confidence, and this has already been seen on the US stock market, with equities dropping significantly when china announced their retaliatory tariffs just over a week ago.
Here’s a recap of what they are, and why there might be more to come.
China’s Current Tariffs
China will add tariffs for up to $3 billion worth of US imports, in retaliation to the steel and aluminum tariffs introduced by the US in early March. China will add tariffs to pork, steel pipes, wine and fruit, and recycled aluminum. Analysts have noted that these tariffs are insignificant compared to those being introduced by the United States, which means that there could still be heavier tariffs in the pipeline, depending on whether the two countries can negotiate new trading terms.
China is also looking at legal options that can be taken against the US, through the World Trade Organization.
The Situation if it Worsens
The White House has threatened that China could be limited from investing in the Technology Industry in the United States, and further tariffs could be added to impact up to $60 billion worth of traded goods between the two countries.
When things were heating up towards the end of March, the Commerce Ministry in China said that “China does not want to fight a trade war, but it is absolutely not afraid of a trade war. We are confident and capable of meeting any challenge.”
After these statements were made, the Dow Jones index dropped almost 3%.
Both countries have made threats that would significantly disrupt trade and businesses in both economies, but it should be noted that neither government really wants an ongoing trade war.
Will Investors Continue to Worry About This in the Coming Quarter?
The situation will be closely watched by Wall Street and stock market investors around the world. We’ve already seen that news surrounding this issue can have a direct impact on stock value, particularly in equities. Raw material prices could also be impacted, depending on any future tariffs that are introduced.
The developing story of the trade situation between the US and China is something that you should stay up to date with, particularly if you have investments in the stock market today.
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