Pause The Wars II

Trade war

Image source: ThanasStudio, Topuria Design, phol_66 - Shutterstock

What's going on?

And the Oscar goes to… the US, for announcing on Sunday that it’s hitting pause once again on increasing trade taxes (a.k.a tariffs) on Chinese goods – sending stocks in both countries up on Monday.

What does this mean?

Tariffs on $200 billion worth of Chinese exports to the US were scheduled to rise from 10% to 25% on March 1st. But the US has now delayed this indefinitely after “productive” talks over the weekend brought the two countries closer to agreeing a trade deal (tweet this).

The US has asked China to keep the value of its currency stable: letting it drop (as the US has accused China of doing before) could offset the effect of any tariff increases. China has reportedly committed to buying an extra $1.2 trillion of American goods like soybeans to even out how much each buys from the other. But the two countries are still tussling over alleged theft of intellectual property from American companies operating in China.

Why should I care?

For markets: Lower tariffs are good for business.

No immediate tariff hike is good news for Chinese companies: they’ll likely benefit from stronger demand than if US buyers were put off by higher prices. The Chinese stock market had its best day in more than three years on Monday – and has now risen more than 20% this year. As things look up, investors are hoping to enjoy a share of the potentially higher profits.

The bigger picture: Speaking of delays…

The UK is due to leave the European Union (EU) on March 29th – but that date may be pushed back too. A key parliamentary vote was delayed until just 17 days before Brexit – which isn’t much time for the country to get its legal ducks in a row. While a three-month extension has been suggested, the EU is reportedly considering a longer 21-month delay in order to give the UK ample time to sort out its negotiating position on things like trade.

Originally posted as part of the Finimize daily email.

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