Trade War Update: Fresh Tensions Shocked The Market

After more than a week without any updates on trade progress from neither leaders from the US or China, yesterday’s comment from US President Donald Trump was a bearer of bad news. Investors’ risk-averse attitude led to a sell-off in the dollar market while diving into safe-haven assets including gold (XAU/USD), Japanese Yen (USD/JPY) and Swiss Franc (USD/CHF). 

According to President Trump, it is better to wait until after the US general election in November 2020 before signing a deal with China. He also emphasized that the utmost importance fact is that whether or not he wants the agreement with China. 

Besides that, US Secretary of Commerce, Wilbur Ross, also added that there are no trade-talks meeting scheduled at the moment, while new rounds of the tariff will most likely take effect on December 15, when a further 15% US tariff on about $156 billion worth of Chinese imports is set to take effect, the actual deadline for an agreement, unless substantial progress is reached before the deadline.  

Previously, China had already threatened to retaliate against President Trump’s signage of the Hong Kong bill. The issue would act as another barrier in trade negotiations, adding on with yesterday’s tensions, market participants now fear that trade progress will turn sour. 

The trade war between two economy powerhouses now enters its 17th month, with concerns for even just a first phase trade deal slowly diminishing. The trade war had since negatively affected the global economy, causing most of the central banks to loosen their monetary policy to off-set trade risks in the market. 

The market is expecting further signals, most probably before the December 15 tariff kicks in. New trade tensions and uncertainties would prompt safe-haven value while lowering investors’ preference towards the stock markets.

Photo Credit: www.tucsonweekly.com/BY JOE HELLER