China calls for 'rationality' from U.S. in trade dispute
- Author: Jon Douglas Aug 05, 2018,
Aug 05, 2018, 2:00
"Investors will now watch any announcement from the White House related to China's tariffs, with any escalation in trade tensions likely to weigh on the Australian dollar", ANZ's senior commodity strategist Daniel Hynes said.
The first wave of 25 percent tariffs on $34 billion of Chinese goods took effect last month, prompting immediate in-kind retaliation from China, and the next round on $16 billion could be implemented by the U.S.in the coming days or weeks. This process was initiated on 10 July.
While the conflict nominally centers around the US's $375 billion annual goods trade deficit with China, it has morphed into a chapter in the nations' broader strategic rivalry. What these numbers do not show is that if United States goods are sent to China for assembly and then returned to the USA, these so-called "intermediate goods" are considered Chinese imports, even if the parts are made in the US.
China said it was ready to retaliate against the latest threat by the U.S.to raise tariffs on its goods.
However, the US-EU discussion on "reforming" the World Trade Organization rules have left many other economies, especially emerging and developing economies, anxious that the two sides could work together to change the worldwide trade rules in their favor.
The Australian dollar has reversed its gains from yesterday, falling 0.3 per cent to 74 U.S. cents.
Two opposite trends prevail in the global markets. The FTSE 100, an index with broad worldwide diversification, was down 0.56% at 7,610 in London while the German DAX was 1.31% lower at 12,569 in Frankfurt.
China has already felt the wrath of tariffs on its goods. The president is said to have dismissed the initial proposal as "weak".
Washington touted its initial tariffs as being carefully constructed to avoid having a big impact on USA consumers and companies, but the expansion of the tariff lists has drawn in more goods that can not be imported from outside China.
"We have been very clear about the specific changes China should undertake", he added.
"We continue to reiterate that environment of U.S. data outperformance, Fed's hawkish rhetoric and lingering concerns of trade war are supportive of the United States dollars". But Trump has urged patience, promising his approach will work if lawmakers and business leaders fall in line and give him more time to negotiate. He told trade officials this week to consider raising that to 25 percent.
As a result America's greenback has now converted a 4% 2018 loss into a 2.78% profit during the three months since the middle of April, following a sustained rally that drew a line beneath a prior 12-month period of heavy losses.
The caveat, with other comments, suggested Powell believed the Fed might be moving too aggressively to tighten U.S. monetary policy. "It will slow the economy".
The US central bank now expects another two rate rises by the end of the year.
So far that doesn't appear to be unduly concerning the US Federal Reserve Board, whose Open Market Committee met on Wednesday and opted not to change US official rates.