For many months we have feared a full blown trade war between the US and China but it seems that has become reality. The tariffs discussed by President Trump on $200 billion of goods increased from 10% to 25% as the midnight ET deadline arrived. China quickly, through its Commerce Ministry said that it would take countermeasures against the move by the Trump Administration. The move is, as expected, is now taking the trade talks into a new period of global economic damage that could see the US, China and other countries fall into recession.
We sourced CNBC for this article, attributed to Jacob Pramuk and Everett Rosenfeld, 10 May.
The world`s two largest economies are now is a deepening trade fight that could cause some pain in the coming months as the next round of talks could be postponed. We at Classiarius believe that the US will try to impact the economy of China – 2018 GDP growth was slower at 6.7% -and is expected to fall even lower for 2019 and 2020. Some experts feel that the US GDP would see a 0.4% drag while China could see a 1.5% negative impact as a direct outcome of these trade talks.
Trump first announced the tariffs on Sunday and said that he was using these tools as he claimed China “broke the deal.” US equity markets have been volatile on these on again, off again talks but we can now look for an aggressive sell-off in global indices with the Dow and S&P 500 leading many markets lower. China equity will be attacked by sellers.
The European Union could see some impact in the coming months as China will be less interested in importing European goods. There are still hopes that the US and China will have a last-minute change of heart but do not hold your breath. The two sides are engaging as they have all week but President Trump feels that China has changed its tone and backed away from promises.