Published On: Sun, Aug 18th, 2019

Trade war between China and the US peaks causing a destroying effect on markets

Today, wars between major countries are not fought by tanks. Economy is the major weapon today. To provide an example the USA and China have been in war for a while; Indeed an economic war.

The trade wars between the US and China have peaked and some concrete steps have been taken in this direction by both countries.

China has stopped buying agricultural products from the US and there have been huge losses in Wall Street. Technology shares on the US Stock Exchange have turned upside down.

US President Donald Trump had recently threatened to introduce new customs duties on Chinese products worth $ 300 billion on the grounds that China had failed to meet its promise to buy large quantities of US agricultural products.

Chinese state television CCTV had reported that an official from the Chinese National Development and Reform Commission said that Trump’s accusations were unfounded.

The last step from China is the last stage of the escalating trade war between Washington and Beijing. China is the country in the world that imports the highest quantity of soybeans, the most valuable export agricultural product of the USA. The Trump administration announced that $ 28 billion had been allocated to compensate for the losses caused by the commercial dispute among American farmers – the electorate who supported Trump.

China responded to Trump’s move last week on Monday. In a written statement on the Chinese Ministry of Commerce’s website China announced that the Chinese companies had suspended the purchase of US agricultural products. The statement also said China hoped that the US would keep its promises and create the necessary conditions for bilateral cooperation.

Chinese officials said that China had been loyal to earlier agreements with the United States, and since July 2, Trump met with Chinese President Xi Jinping in Osaka during the G-20 Summit, soybeans had been loaded and transported to China in July. China was importing 32.9 million tons of soybeans from the US in 2017 before the war broke out with the US.

The escalating tension in the trade war between the US and China adversely affected both the US stock market and the performance of the Chinese currency Yuan.

Up to 3 percent losses were experienced in the US stock market. The Dow Jones Index fell 3.26 percent. The loss of the three main indices of Wall Street in terms of economic data during the trade war with China was recorded as the biggest drop in 2019 in a single day. The shares of technology companies, whose influence in the Chinese markets are clear, declined.

China’s currency, the Yuan saw the lowest level in the last 10 years. Many investors see China allowing the Yuan to depreciate against the Dollar as a direct response to Trump’s decision to add additional customs duties to the $ 300 billion product imported from China.

On the other hand the weakness of the Yuan and the strength of the Dollar create problems for companies that do significant business in China because they increase the price of products for Chinese customers.

US President Donald Trump once again accused China of manipulating the currency after which he slammed the US Central Bank. He said ”China lowered the price of Chinese currency to the lowest level. It’s called currency manipulation. Do you hear, National Bank? This is a great violation that will weaken China greatly over time.”

Trump also said “China has always used currency manipulation to steal our jobs, our factories, damage our employment, and damage our farmers’ prices. It won’t be able to use it anymore! ”

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