Brewing Trade War Continues to Pressure Markets

The trade war between the United States and China escalated on Tuesday after U.S. President Donald Trump announced another 25 percent tariff on nearly $50 billion of Chinese imports. The products being targeted in Trump’s latest crackdown include robotics and products used for aerospace, communication and information technology development. According to the White house, the list of new targets is aimed at harming China’s industrial plans with minimal impact on the U.S. economy.

Many of the products on the new tariff list have not recently been imported to the U.S. Such products include large aircraft and communication satellites and artillery weapons.

China’s Ministry of Commerce responded to the new tariffs by saying that it “will soon take measure of equal intensity and scale against U.S. goods.” Though no specific targets were specified, analysts predict that U.S. soybeans, machinery and aircraft will be next on China’s tariff list.

The dollar slumped against most of its trading partners on Wednesday on fears that the escalating trade war would have harmful effects on the U.S. economy. The greenback declined 0.08 percent against the yen as of 12:50 p.m. HK/SIN, trading at 106.51. The dollar was also down 0.1 percent against the euro to $1.2281. Traders are worried that the dollar could continue to face pressure as trade tensions escalate and are eyeing the yen as a safe haven. Responding to these predictions, Bank of Japan Governor Haruhiko Kuroda has pledged not to let political tensions impact his plan to curtail Japan’s loose monetary policy.

Despite the escalating tensions, Wall Street bounced back slightly on Tuesday with the Dow, the S&P 500 and the Nasdaq all closing over 1 percent higher. Asian markets were less optimistic, trading mixed as of Wednesday afternoon. The Nikkei 225 was up 0.10 percent and the Shanghai Composite was up 0.80 percent. The Kospi and the Hang Seng Index were both in the red while the ASX 200 traded flat.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.