What's going on?
In spite of the fact trade tariffs really started getting into their stride last month, China surprised many on Thursday as it announced exports to the US in October up 16% on the year before (tweet this).
What does this mean?
You’d be forgiven for thinking that the hefty import taxes that came into force in late September would be enough to put off US customers from shipping in goods from China. But the promise of the US introducing yet more tariffs at the start of 2019 left importers scrambling to get ahead of the curve and avoid potentially having to pay even higher prices for Chinese goods.
Some investors are concerned about the repercussions the ongoing trade war might have for the country on whom the world largely relies for global economic growth. It’s made them less willing to invest in China, reducing demand for its currency and thereby making it less valuable. For buyers in the US, however, that means that, even with tariffs, Chinese stuff isn’t quite as expensive as feared.
Why should I care?
For markets: Markets aren’t jumping for joy just yet.
Even though the data was good, the prospect of further tariffs and stockpiling of unsold Chinese imports Stateside is still worrisome for investors. Chinese economic growth has already started to slow, with consequences for global markets. If the slowdown continues, that could eventually lead to lower sales and profit growth for companies worldwide – and lower economic growth in the countries they call home.
The bigger picture: A trade deal could be good for everyone.
The uncertainty stemming from the trade war has caused China some problems. But failure to reach a deal on future arrangements could give the US some headaches, too. With Democrats now controlling part of Congress, growth-boosting tax cuts and increased spending may be off the cards. Higher import costs from China could end up being passed on by companies to consumers (i.e. inflation), reducing people’s ability to buy goods and slowing growth further.