The rising US and China tensions will negatively impact the financial sectors of China. Although Beijing tries to console itself in the face of the US and China Trade war, many other Chinese companies are expressing their worry with the war.
Beijing is firm
Beijing has remained unbend-able and have a firm stance as the US continues to issue tariff threats. The other Chinese countries and the companies are very concerned that their businesses will experience extreme downfalls if these tariffs and trade restrictions imposed by US do not stop.
Financial markets become unstable
The increased insecurity and uncertainty in the international market due to the US and China Trade war will subsequently make the internal finance market of china unstable. This is a serious and unavoidable challenge for the commercial bank of China. The bank authorities fear that many other financial centers and commercial sectors of Chinese economy will get adversely affected.
Nevertheless, many Chinese companies in Beijing, are still positive and do not disclose the imminent risk they might face as repercussions of US and China Trade war. They put forward the claim that their businesses would not get affected greatly.
So, here we are. We see the two greatest and leading economies of the world against one another firing open shots through trade war. Such a trade war can have all encompassing consequences for companies, employees, consumers and political leaders.
Trump is all set to initiate the US and China trade war
So let say that we have a Chinese investor who makes use of her smartphone to observe the stock prices at the Chinese Stock Exchange on Thursday, 6th July 2018. On the other hand, we have the mighty Donald Trump who has announced the greatest trade war between two greatest economies in the world. But imposing prohibitions on trade through tariffs, he aims to change the stock market dramatically the very next day. He is totally determined to intensify a trade war between the two countries without taking in to account that US will equally suffer as China.
The first round
So, the two opponents on the either side of the tennis court are ready to strike and win in their courts. So, on Friday, 7th July 2018, the US under Donald Trump, imposed a 25% tax on Chinese imports that were worth of $34 million. The Chinese government, counteract with the same percentage of tax on US made products such as electric car, pork meat and soya beans.
Why is US so rebellious?
The US government headed by Donald trump aggressively alleges China for employing destructive tactics to supersede US technological hegemony in the world. Such destructive, predatory strategies include:
Thus, US government tariff measures under the leadership of Donald trump aims to pressurize the Beijing government to become mindful of their action. Trump believes that by doing so, he can force the Chinese government to reform their trade and commerce policies.
It a draw in the beginning
However, the action and counteraction from both the economies are at an equal footing. Therefore, it is unlikely that neither of the nation will get severely affected by the first round of tariffs impositions. Donald Trump is so adamant on winning the trade war as he tries to outwit the Chinese economy by imposing huge trade prohibitions. He claims that he is all set to impose tariffs on Chinese imports that are worth $550 million. This is way beyond the imports worth 506 million dollars that were traded with US in 2017.
Is negotiation possible
Unless and until US government under Trump negotiates with the government authorities in Beijing, a lot of financial and trade sectors will be put on stake. As the prices of tariffs continue to exacerbate with each round, the economy of both the nation will face rising inflation. This will lead to increase prices of goods, rising unemployment and low incomes. The financial markets will begin to shake and investments will become slow.
Chinese yuan drops
The Chinese Yuan has dropped significantly against the US dollar. The currency has seen a 3.5% decline with respect to US dollars in the international market. This drop will give the Chinese companies an upper hand regarding price over their US competition.
US suffers
Nevertheless, the trump administration is shrewd enough to target Chinese industrial goods rather than consumer goods while imposing tariffs in the first round. Sadly, the later consequences of such an act are alarming. The US companies who rely on Chinese machinery and components to process consumer goods will be seriously affected in the long run.
In a nutshell, the US and China Trade war will severely affect both the leading economies of the world. No one is the winner yet and no one can win because both the nations are equally competent in their respective areas of expertise.
