Fear of an all-out trade war returns after China imposed tariffs on US$50 billion worth of US imports, USDJPY plunged 70pips in an hour!

China has just announced a fresh wave of tariffs on US goods including American soybeans, beef, autos and SUV. This is a retaliation to the US tariffs that were announced last night which covers over 1300 products ranging from technology products such as TV and cameras to vaccines and medical products. All these products are affected by a newly imposed 25% tariffs.

This came as a surprised after US and China went behind doors to discuss a “favorable” deal that would not hurt their trades as much.

  • The Chinese yuan fell 0.4% against the dollar, the largest fall in two weeks.
  • USD/JPY fell close to 70 pips in an hour after the announcement of the news
  • US Stock market that is opening later is expected to fall drastically
  • China being the largest importer of soybeans and the reason why China target US soybeans is due to the fact that 8 of 9 soybean-producing states voted for Trump. This could hurt Republican-supporting states which in turn hurt Trump’s popularity.
  • A full-blown trade war would be a “lose-lose” as mentioned by China’s deputy finance minister Zhu Guangyao. US claims that these 25% tariffs are prompted by Beijing’s long running “intellectual property theft” of valuable technology and ideas developed by US companies.For now, the market’s appetite for risk is off and we should expect inflows into safe havens once again.

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