Trade War Expected to Precipitate Further
The trade war is escalating as China stands its positions and as a result, risk assets continue to decline
The trade war between China and the US was dying out earlier this year as both sides were heading towards a trade deal. But, it escalated once again a few weeks ago after China decided to backtrack on promises. If China backtracks on IP theft and forced technology transfer, then what is there to agree on? And it seems like this trade war will escalate further. China just released an official statement which you can find below:
Facing an aggressive U.S. protectionist stance, China has demonstrated full readiness to fight back by announcing tariff countermeasures. China has reiterated that necessary counter strikes will be rolled out if the United States continued to act willfully. Make no mistake, China is not bluffing.
No doubt China will also suffer bruises during the fight, but further U.S. unilateral protectionist moves would only boost China’s morale and patriotism to unite as one formidable force to counter any challenges, as seen repeatedly in China’s history. The United States shutting its door to Chinese products and investors will hurt involved players, but will help push China’s economic transition to become a self-made global innovator.
This looks more like a declaration of real war than a trade war declaration. The US has no other way but to push forward with this since it loses anywhere between $250 billion and $600 billion from IP theft and forced technology transfers.
I expect the sentiment to remain pretty bearish in the coming days and weeks if this goes on and risk assets such as commodity Dollars and stock markets should be on the retreat, so we are looking to sell these assets.
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