US-China trade war heats up

World trade is increasingly at risk as the US-China trade war kicks in and heats up.

Reuters: Trump’s $500 billion trade threat makes China’s already battered investors shiver

Six months of wrangling over trade tariffs with the United States has wiped out about a fifth of China’s stock market value and driven its currency down sharply. But those moves may have just been a downpayment on what is yet to come.

Shanghai’s benchmark share index .SSEC is down roughly 22 percent since January, when U.S. President Donald Trump’s first trade tariffs on solar panels were announced. It has fallen 9 percent since June 19, when Trump outlined his plans to tax a lot more Chinese imports than he initially proposed.

Tariffs on the first batch of $34 billion worth of Chinese imports kicked in on Friday. Beijing said it had no choice but to respond in kind by taxing a similar amount of U.S. goods coming into China. U.S. tariffs on another $16 billion of Chinese goods are due to go into effect in two weeks, Trump said on Thursday.

But Trump also raised the temperature much further by telling reporters that after the initial $50 billion of goods has been targeted with tariffs, Washington could add another $500 billion.

With Beijing indicating it will respond with tariffs on more U.S. imports or other corresponding actions of its own, the specter of a full-blown trade war risks sinking China’s markets deeper into bear territory.

This could get very ugly, and New Zealand could easily be affected.

NZH: How US-China trade war could affect NZ

With a trade war brewing between two of the world’s biggest economies, China is more likely to be prepared to agree to more favourable terms in the upgrade of its Free Trade Agreement with New Zealand.

Short-term there is potentially some upside for New Zealand if producers here can replace some of the American products in China.

This is where our FTA talks can help, to position these short-term opportunities as long-term realities. And the Chinese may be appreciative if we show good faith, which we have done in the past.

If we show good faith to China in a trade war Trump may not view us very favourably.

Trade Minister David Parker…acknowledged the proposed e-commerce chapter in the upgraded FTA is of particular importance to New Zealand.

It’s a difficult issue as the Government is moving to reform our GST rules on online shopping, which is likely to act as a barrier to expanded e-commerce.

Imagine what headaches it could bring to Kiwi exporters if China introduces a similar rule and New Zealand exporters are required to register for VAT in China?

There are a lot of ‘what ifs’ in the international trade arena at the moment. I don’t think anyone can know how it will pan out.

12 Comments

  1. Blazer

     /  July 7, 2018

    this developing will effect NZ way more than the tedious line re declining business confidence…here.

    • Blazer

       /  July 7, 2018

      IMF-‘Key risks for the New Zealand economy came from a global move towards protectionist trade policies, and also a worsening global economy.

      “While the outlook remains favourable (for New Zealand) and near-term risks are broadly balanced, medium-term risks are tilted to the downside including tighter-than-expected global financial conditions and growing protectionist policies in other countries.”

      New Zealand was in a good position to invest in its future.’….NZH

  2. Alan Wilkinson

     /  July 7, 2018

    Get ready for more taxes as Govt revenue falls, B. The monster has to be fed.

    • Blazer

       /  July 7, 2018

      yes National created a debt Gorilla…it must be fed.
      Compound interest served up to debtors ,the way Capitalism works.=debt slave.

  3. David

     /  July 7, 2018

    Good on Trump China behave shockingly, except with us, with the theft of intellectual property, the restrictions on US tech companies being able to operate there and the large tariffs they impose.
    Looks like he may have a breakthrough on EU car tariffs, the EU levy 10% and the US 2.5% and under threat it looks like Merkel is going to try and push through a zero tariff regime.
    Its ugly but its effective and if you have a trade deficit with the US and high tariffs well look out. NZ will be a beneficiary if Trump wins in global tariff reductions.

    • Joe Bloggs

       /  July 7, 2018

      trump’s trade war with Canada blows your waffle out of the water. You’d be a fool to claim that Canada has behaved shockingly with regards to American trade, when the US actually has a trade surplus over Canada.

      And there’s far more productive ways of dealing with China’s technological pre-eminence than to ignite global trade wars.

      trump’s tariffs have already hit American soy and corn farmers hard
      https://www.motherjones.com/food/2018/07/as-trumps-china-tariffs-kick-in-us-farmers-watch-prices-slide/

      America’s largest nail factory is on the brink of extinction – their orders have dropped 70% since trump’s tariffs were imposed on steel
      https://www.cnbc.com/2018/06/28/nails-whiskey-and-other-products-getting-hit-by-tariffs.html

      Harley-Davidson are bailing. And on… and on… and on…

      trump’s tariffs are just a tax on Americans, they’re already costing Americans their jobs and already crippling the very industries trump thinks he’s helping… completely self-defeating

      try telling that to a trump supporter though – they’re rather eat their own vomit than admit to the flaws in trump’s trade wars

  4. Patzcuaro

     /  July 7, 2018
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