Trade wars and risky currencies
Published on 06.07.2018 11:56

Traders might be wise to avoid the riskier currencies and park their money into stronger one’s such as the US dollar or Japanese Yen as the US gets ready to introduce tariffs on a range of Chinese goods which threatens to spark a full on trade war and send shockwaves through the global economy.

From today, the US government  will introduce a new tax on more than 800 Chinese products with a market value of $US34 billion per  year on claims that the Chinese government engages in unfair trade practices which are currently hurting American business.

 

China is poised not to take this lying down and has vowed to retaliate with 25 per cent  tariffs of their own on US products worth $US34 billion per year which will hit industries in the US such as oil and seafood exports.

Chinese ministry of Commerce spokesman Gao Feng warned that US proposed U.S. tariffs would hit Chinese businesses hard and there was still time for the US to rethink the situation

“If the U.S. implements tariffs, they will actually be adding tariffs on companies from all countries, including Chinese and U.S. companies,” Mr Gao said.

“U.S. measures are essentially attacking global supply and value chains. To put it simply, the U.S. is opening fire on the entire world, including itself. China will not bow down in the face of threats and blackmail and will not falter from its determination to defend free trade and the multilateral system.”

The chances of the US backing down from introducing the tariffs t is close to zero according to most analysts so the market better be ready for some wild swings and in conditions as uncertain as this the US dollar usually benefits.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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