Trade war will severely affect economy, Wall Street.
TRADE war is inevitable as the US has hit China with trade tariff and is now faced with strong China response, the phenomena which has a far reaching repercussion on the world trade scene and the stock markets.
While China said there would be no winner in this war, the US is set to suffer more in this war and eventually it could lead to stock market crashes if US President Donald Trump insists to go all out, meaning wealth of the Americans would be massively wiped out.
In early March Wall Street and Asian markets tumbled after President Trump said the US would impose tariffs of 25% on steel imports and 10% on imported aluminum.
Again last week, President Trump announced a raft of new tariffs on as much as $60 billion worth of goods against China over intellectual-property violations, targeting more than 100 different Chinese goods to combat the rising threat from a nation it called “an economic enemy.”
Such announcement has triggered fears among investors that China would respond fiercely to such an extent that the trade war would darken the otherwise a bright economic outlook.
Trade war fears last week wiped more than 1,100 points off the Dow in just two days–Wall Street’s worst week in more than two years.
Their worries were logical as China on Friday unveiled plans to impose tariffs on up to $3 billion of US imports in retaliation against US tariffs on Chinese products.
China was considering a 15% tariff on some US products, including dried fruit, wine and steel pipes, and a 25% tariff on pork products and recycled aluminum, its Commerce Ministry said, adding that it has assembled a list of 128 US products in total that could be targeted if the two countries are unable to reach an agreement on trade issues.
The new trade war by President Trump is also seeing an immediate and effective blowback in the form of a refusal by Beijing to lift its ban on the import of foreign garbage, reported Sputnik news.
China has long been the world’s largest importer of waste and recyclable commodities. Now that Trump has threatened harsh new tariffs in an escalating trade war, Beijing has announced that it will not overturn a new ban on accepting shipments of garbage from the US and other countries, leaving industrialized nations scrambling for options on how to dispose of an ever-mounting landscape of trash.
The U.S. Institute of Scrap Recycling Industries said the ban would devastate an industry that supported 155,000 jobs and had exported 80% of the US scrap worth $5.6 billion to China in 2016.
In a related move, China, as the world’s biggest oil buyer, is to open its domestic market to trade futures in yuan currency in a challenge to established global crude benchmark, the petro-dollar.
Beijing will waive income tax for overseas investors trading yuan-denominated crude oil futures contracts, its Finance Ministry announced last week. The measure, to cover both institutional and individual investors, is aimed at attracting foreign capital.
Foreign brokers will also be exempted from paying income tax on commissions they earn from dealing in the new futures contracts to be launched at Shanghai’s International Energy Exchange on March 26, the Xinhua news agency reported.
Overall, escalating trade war would affect Wall Street further in the foreseeable future and technical wise, Lung Chaloke, the stock technical expert, forecast that the Dow Jones Industrial Index could crash to 17,000 or lower from the recent high at 26616.71 in January this year.
And as the trade war has started, Beijing has decided to introduce new measures, including easing of visa policies and cash incentives of up to one million yuan (US$158,000) to attract top class global talent to work in the capital, as China competes with the US in artificial intelligence and life sciences.
It will fast track qualified individuals’ multiple entry visas valid for up to 10 years, offer “green card”, which allows holders to buy property, cars and access to local school.
China’s State Council laid out goals to build a US$150 billion domestic AI industry in the next few years, and to make the country an “innovation center for AI” by 2030.
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Top: US-China graphic from Straitstimes.com.
By Kowit Sanandang
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