Chinese Bite Back, As Both Sides Dig In
May 23, 2019 - 7:35pm
Although it’s been over a week, with both China and the United States moving farther away from an agreement and resolution to the current trade war.
The additional tariffs That Trump initiated by raising the current tariffs from 15% to 25% was huge, and the blacklisting this week of the tech company Huawei, also fueled the strong response by the Chinese.
The moves on the part of the United States has had a dramatic impact on the Chinese economy. The intention by the administration was obviously to have the Chinese be more flexible, the truth is it has created a scenario where both sides are digging in more deeply.
While it is extremely obvious that the South China Post absolutely has a 100% bias, statements made by that publication over the last two days are extremely alarming.
According to the South China Post Beijing is “vowing to fight to the end” and the U.S. preparing to place a 25% tariff on a further $300 billion of Chinese imports, China may have “no choice but to sell” its U.S. Treasury holdings, according to some analysts and reports widely distributed on China’s social media.
This publication also stated that a meeting between Chinese President Xi Jinping and U.S. President Donald Trump at the G20 summit in Japan next month is still up in the air. “Current conditions” are not right, a Chinese state researcher said, “Given the current conditions, what can really come out of the G20?” said Zhang Yansheng, the chief research fellow at the state-backed China Centre for International Economic Exchanges think tank.
Also reported was that an official at the Xinhua News Agency on Monday claimed that “bullying by the US side” was the cause of the failed trade talks.
“The People’s Republic [of China] has been standing tall in the East for the last 70 years, it has never lowered its head and it has never feared anyone,” Xinhua said. “History will prove again that bullying and threats by the US will not work.”
It is quite obvious that these quotes from Chinese officials and publications are clearly stating that they have dug in deeper and will continue to take a hard line which clearly will extend the current trade war. In fact, they are now calling this a “Technology Cold War” rather than a trade war.
These collective statements over the last few days have risen to a degree that have greatly alarmed the investing public which to express their concerns in their holdings as U.S. equities selloff and gold shines with its safe haven component.
However, it was today that investors chose to react as equities plunged. The Dow Jones industrial average was down over 400 points to close down 280 points which is a decline of 1.11%. The tech heavy NASDAQ composite lost 1.58%, and the S&P 500 lost 1.19%. Gold futures reacted sharply trading to the upside with a net gain of $8.80 and is currently fixed at $1283. It traded to a high today of $1287 which definitely changes the overall market sentiment for the precious yellow metal.
The only question remains is whether or not market participants will see these deep chasms as having a long-term effect which would take equities dramatically lower and take gold prices dramatically higher.
Wishing you, as always, good trading,