Last week U.S. President Donald Trump fueled the trade war with China by hiking tariffs from 10% to 25% on $200 billion worth of exports from China. For now, negotiations between the two giants are paused and the world is eagerly awaiting to see how the trade war will play out. How will the trade war impact the economy?
Trade War update
Just as the world thought that the trade war between the United States and China was approaching a negotiated resolution, U.S. President Donald Trump announced a possible increase tariff of 25% on various Chinese imported goods.
According to several news outlets, Trump accused the Chinese government of going back on their word to adapt laws so that it could accommodate terms of the current draft agreement. Chinese Vice-premier Liu He scheduled a meeting with the U.S. this week to complete the draft agreement and continue with talks. However, the meeting did not go ahead. It is said that China made changes to the 150-page draft trade agreement. So, this means that the trade war will continue.
How the markets are reacting
According to market analysts, equities have dropped this week whilst currencies have shown little change. The S&P 500 went down 13 points this week and the Dow started the week with 344 points down. However, the Japanese Yen lost almost a figure and went from 111.09 to 110.13.
This is to be expected since the trade war speaks directly to China selling products in the United States. It is understandable that tariff hikes will hit China’s sales of goods and affect their currency.
It is said that on a global scale, the continuation of the trade war could drive a weak global growth down further. The repercussions could be severe and a potential recession could be around the corner. Should the U.S. and China continue on this path, it may decrease the competitiveness of U.S. companies.
It is important to know that the U.S. does not hold all the cards. China has a 25% tariff on imported agricultural commodities from the U.S. China could potentially double this in retaliation. In case of an economic fallout between China and the U.S. it would impact U.S. consumers directly.
What impact is the trade war having on Bitcoin?
The price of Bitcoin has recently jumped from $6 000 to over $8 000. Whilst there are a lot of good reasons for this jump, the trade war may also be having a positive impact on the price of Bitcoin.
Both Chinese and U.S. regional investors could be offloading their portfolio risks to the crypto space. Since the Yen has taken a bit of a dive, Chinese investors could be buying Bitcoin to protect their money ahead of the trade war.
How will the trade war impact the economy?
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