United States and China trade war is expected to intensify in the coming time according to the analysts at Wall Street post this weekend, for which they warned the investors.
Chris Krueger, a Cowen analyst said that the new U.S. tariffs were retaliated overnight by the Chinese government in a manner to draw the attention of the US President.
According to analysts from Morgan Stanley, a global economic recession is likely to be a result in the next nine months if further escalation does not happen in 2019 itself.
Post Trump’s announcement of adding 10 percent tariffs to $300 billion worth Chinese goods, China responded immediately in two folds. Frueger explained that China tapped a psychologically significant threshold when first its Central Bank allowed its currency the Yuan to fall below 7 to the dollar.
Though devaluing its currency to counter tariffs has been denied by China’s Central Bank, instead it claimed that market drove the fall. Howveer, it has to be noted that controlling the currency has been a move China has used even in the past. Since 2008, the latest fall of China’s currency has been the lowest level against dollar. This move reflects that a near- term deal is not being sought by the Chinese.
The second move made by China as a response to US government’s adding tariffs has been of directing state- controlled buyers to pause all purchases of the agricultural imports from the Unites States, which Beijing denies claims that it simply wants to wait and see how trade negotiations fair.
Trump on the other hand has justified the increased tariffs as a result of China failing to fulfill its agreement of buying large quantities of agricultural products.
Krueger also informed that the Chinese government may clamp down on the foreign firms that are operating in its country. An approach towards it could include creating a list of ‘undesirable entities’. In conclusion, mostly analysts all over agree that the situation may not find relief anytime soon and the trade relations may only further deteriorate with China.
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