Donald Trump- Xi Jinping Summit Catching Heat! - Forex News by FX Leaders

Donald Trump- Xi Jinping Summit Catching Heat!

Posted Wednesday, April 5, 2017 by
Arslan Butt • 2 min read

In our weekly report, we discussed that on the 6th and 7th of April, the U.S President, Donald Trump is due to meet with Chinese President Xi Jinping in Florida. They will be discussing the bilateral trade and security issues, including North Korea and the South China Sea.

The summit is gaining a lot of attention after U.S President Trump commented over the weekend that he expects the meeting "will be a very difficult one". This put the global stock markets under pressure and the bullion market is supported.

Now let us understand the major issues that they are likely to address in the meeting.

Donald Trump Vs. Xi Jinping

Donald Trump Vs. Xi Jinping

China & North Korea – Relationship

One of the major issues sure to be discussed is North Korea. On April 15, they launched another ballistic missile into the Japan's waters. This is a threat on the global level. If the missile was fired by North Korea, then why is Trump so focused on China?

Trump believes that China has great influence over North Korea seeing as China is North Korea's main ally. North Korea receives 90% of its food and fuel demands from China. That puts China into the position of strength in their relationship.

Based on this position of power, Donald Trump wants China to place more pressure on North Korea to stop their nuclear and missile programs. According to China, they don't hold enough control over North Korea to be able  to stop them from going ahead with their nuclear programs.

Trade Surplus and Currency Devaluation – China

The second major issue is that China is on the top of the list of countries that have a goods trade surplus. Let us understand what trade surplus means and how they got to be at the top.

The trade surplus is simply the difference between the country's exports and imports. According to Trump, China is artificially devaluing its currency in order to capture more market shares. Since the weaker Chinese Yuan is attracting international business this ultimately impacting the U.S markets for the worse.

Here, let me quote the words of President Trump, "When you talk about currency manipulation when you talk about devaluations, they are world champions."

However, China denies all the allegations. Mr. Xi commented in an interview that "China does not deliberately seek a trade surplus. We also have no intention of carrying out competitive currency devaluation to stimulate exports. This is not our policy."

Honestly, the issue is complicated and interesting as well. Let's wait and see what comes out of the meeting. Perhaps, before the meeting, investors may feel uncertain about the market. These uncertain investors are likely to switch their investments from the stock market to the bullion market.

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About the author

Arslan Butt // Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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