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Thursday, June 28, 2018

China Answers On Trade Quietly

China's trade tension response has been relatively quiet for about a week. While the US added tariffs, pressed forward to limit foreign investment and set export restrictions, China hasn't directly answered to the last few moves; not directly. But indirectly China just showed where it stands on trade.

Iran And Currency Are China's Answers On Trade

Despite US calls to China to end ties with Iran China openly accepted doing business with Iran.

That's a bold move especially since the US nearly put ZTE out of business for ties with Iran.

China also allowed its Yuan to drop. That comes after countless accusations by Trump during his Presidential run that China manipulates its currency.

Both moves by China clearly stand counter to US preference and act as a hint that this trade war may not end so fast.

Why Is This Important?

The US initiated $50B in tariffs on China and China answered in kind. Then the US upped the ante to $200B and said if China responds the US will add yet another $200B. Since then China's response has been silence.

Within these two moves though, Iran and Currency, we have a sense of where China stands. That stance tells us China doesn't plan to back down. This may not settle quickly. With these two moves China directly poked The US on prior trade issues.

Conclusion

The longer the trade war takes to settle the more risk there is for stocks particularly tech stocks. The longer it takes to settle the more questions businesses will have which can slow fundamentals.  We hope for a quick solution.

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4 comments:

  1. for over 2 years ive been posting that the Chinese will not be pushed around. recent quote from china prime minister. " In China we punch back" bloodbath now worldwide. Gary Cohn walking away was enough for me to raise cash. RR

    ReplyDelete
    Replies
    1. sounds wise. I think they haven't met the likes of Trump but yes it could get worse before it gets better. This IP issue sounds too big to fix right away. Thanks for the thoughts. Lets hope for a quick and peaceful solution.

      Delete
  2. We have an Idiot in the WH, surrounded by Mad Dog advisors

    ReplyDelete
    Replies
    1. But our job is to figure out the next move and the market's impact. So what's your take?

      Delete

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