Trump Threatens Further Trade Tariffs Ahead of G20 Meeting

Threats Come Despite Warnings By The IMF & OECD

0 37

The main focus of the upcoming G20 summit this week will not be any discussions taking place within the formal proceedings but instead, the meeting taking place on the sidelines between the US and China.

The year-long trade war between the world’s top two economies has escalated over recent months, and its impact on the markets has been visible with equities and commodity prices slumping as uncertainty grows.

Trading the news requires access to extensive market research - and that's what we do best. Open your Orbex account now.

Global Growth Under Threat From Trade Wars

Both the IMF and the OECD have warned against the dangers of protectionist trade policies and have both listed trade wars as the biggest threat to growth. Indeed, many individual central banks have also clearly highlighted the dangers of ongoing trade disputes and the negative impact they are having on both domestic and global economic outlooks.

News of the meeting inspired confidence in the market, especially in the midst of a slew of positive output from President Trump who declared his optimism over the chances of the two countries finally striking a trade deal as Chinese and US negotiators met for preliminary talks ahead of the meeting. Equity markets were visibly relieved in response to these reports, with the S&P trading back up off its October lows and commodity prices seeing a similar lift.

However, this optimism was short-lived, and Trump has once again taken to threatening China publicly, even just days ahead of the keenly anticipated meeting.

 Speaking with the Wall Street Journal, Trump told reporters that he is “highly unlikely” to agree to Beijing’s requests to postpone the onset of higher tariffs on Chinese goods, due to start in January. The 10% tariffs on $200 billion worth of Chinese goods are due to increase to 25%.

Beijing has requested that the US postpone this increase while the two sides are engaged in negotiations. However, Trump said that he plans to press ahead with the tariffs and also said that if the talks this weekend don’t go well, he plans on tariffing the remainder of all Chinese goods going into the US, a threat he has made before.

Trump Threatens Further Tariffs

Trump told the Journal: 

“If we don’t make a deal, then I’m going to put the $267bn additional on”. 

Regarding the actual levy to be applied, Trump said it would either be 10% or 25%. Furthermore, Trump said that Apple products such as iPhones and computers being imported from China could also be hit by tariffs.

While these comments have come as a blow to the market, serving to exacerbate investor uncertainty rather than assuage it, they don’t come as a surprise.

Trump is renowned for his public and confrontational negotiation style, one that won him a lot of supporters during his election campaign. These comments simply represent the same political posturing and show-of-strength tactics which Trump has used throughout his time as president.

However, these tactics are unlikely to achieve the desired effect with China, a country known for its pride and independence. The Chinese government will not take kindly to Trump’s further threats which they deem offensive and humiliating, and as such, Trump is carving a hard road for himself in the upcoming meetings if he truly wants to agree on a deal on trade terms.

Technical Perspective

s&p

The S&P remains tightly congested currently between the 2604.37 October low and the 2801.65 level resistance which capped the rebound. If we see the downside level break, the next key zones to watch will be the 2551.87 swing low and below that the 2482.29 level which holds the completion of the large ABCD correction from the highs.

START TRADING

or practice on DEMO ACCOUNT

Trading CFDs Involves high risk of loss