By Gunnar Schifley, Staff Writer
There have been a lot of discussions lately surrounding the trade situation between the United States and China. Talk of tariffs from both countries has increased concern among investors and has shifted the political picture in Asia.
A few weeks ago, the United States announced tariffs on steel and aluminum aimed at Chinese imports after national security concerns. This came after tariffs were imposed back in January on solar panels and large washing machines, imported from and mainly produced in China.
China subsequently put over 120 different tariffs in place in a direct response to the United States’ actions. Over the last nine days, the United States and China have gone back and forth with tariffs and both threaten to impose more tarrifs.
Tuesday, a speech by Chinese President Xi Jingping seemed to ease concerns over the escalating trade tensions between the two countries. He specifically talked about protecting intellectual property, reducing the import tariffs on automobiles and changing the ownership rules for auto-manufacturing companies.
These are three points President Trump has raised serious concern over through his rhetoric over recent days. This shows the United States that China is willing to work on resolving this back-and-forth tariff expansion one piece at a time. Before this, many investors saw increasing risk of this escalating into a trade war. This speech calmed the rhetoric and could potentially calm investors.
During the course of this conflict last week, markets saw a large increase in volatility, as the future of the situation became more and more unfavorable in the eyes of many investors.
Over the last month the S&P dropped over six percent, with many analysts crediting the increasing turmoil with China as a large factor. This speech has made many investors rethink the two countries’ relationship and reevaluate the risk that lies within the afflicted markets. Futures prices started to level out and the equity markets reacted positively.
Since this trade tension started to escalate at the beginning of the year, the market has had a few different events causing a downturn. Recently, the ramifications this trade tension has on the market became much more apparent, as the statements and actions of both countries escalated at a faster pace. After Tuesday’s speech, investors are hoping to see a de-escalation in these tensions in order to bring calm to the markets.
Over the last month, some have called this downturn a correction in the overvaluing that may have been going on while others see this as a serious indicator of the financial implications surrounding a potential trade war with China. Investors and officials from both countries will be keeping a close eye on this situation as it continues to unfold throughout this quarter and the rest of the year.
