The United States violated the WTO rules and launched the largest trade war in economic history to date. This kind of taxation is a typical trade bullying, which is seriously jeopardizing the global industrial chain and value chain security, hindering the pace of global economic recovery, triggering global market turmoil, and will affect more innocent multinational corporations, general enterprises and ordinary countries. Consumers will not only be helpless, but will also harm the interests of American businesses and people.
That’s the official word from China’s Ministry of Commerce with regard to the tariffs that Trump slapped on $34 billion in Chinese goods just after midnight on Friday and as you can see, Beijing is not amused.
Xi immediately hit back (as expected) and here we are, staring nervously down a path that the vast majority of folks in developed and emerging markets would rather not traverse or, perhaps more aptly, walking reluctantly down the plank while being prodded from behind by a real estate tycoon-turned populist with delusions of autocratic grandeur.
Here’s a road map that documents how we got here from BNP:
In their statement, the Chinese Ministry of Commerce again reminded the world that they did not start this, Trump’s Navarro-esque revisionist history notwithstanding.
“We will promptly inform the WTO about the situation and work with countries around the world to jointly safeguard free trade and the multilateral system”, China continued, adding that irrespective of recent developments, China will “unswervingly deepen reform and expand opening up.”
One can only chuckle at the reference to the WTO there. Despite the fact that the U.S has won nearly 86% of the cases the country has initiated before the WTO over the last 23 years (compared to China’s comparatively paltry 66.7% success rate), Trump is still telling the public that the organization “treats [America] very badly” and telling aides that the WTO is “always f*&cking us“.
Global markets appear to be taking the view that Friday’s escalation was mostly priced in, but it’s worth noting that the Shanghai Composite (which, like Jeff Sessions after a Trump Twitter tirade, is “beleaguered“), swung in a pretty wild range, falling more than 1.5% to a fresh two-year low, before turning sharply higher to rally by nearly the same amount and then paring gains into the close:
Still, this week marked the seventh weekly loss in a row – that’s the worst streak in six years:
The second round of tit-for-tat tariffs go into effect in two weeks. In the meantime, the US/China equity ratio is sitting at its lowest level since 2006: