The US hiked tariffs on $200 billion worth of Chinese goods earlier in May. China retaliated by raising levies on $60 billion worth of US imports. Below are the recent developments on the US-China trade war.
Huawei
Trump said he expected the US-China trade war to end swiftly. He also noted a trade deal with China could lift tough restrictions on the Chinese telecom giant Huawei.
Although Trump said that “Huawei poses an unacceptable risk to the national security of the United States” it is also true that Huawei has the best technology for the 5G wireless infrastructure build-out, but without components from American suppliers, that technology just doesn’t work. Meaning that it is impacting American companies negatively. Such companies include Qualcomm, Skyworks Solutions, Broadcom, Micron, and Xilinx.
Apple
Apple’s China business accounted for more than 17% of its sales in Q219, coming in at $10.22 billion. The company also sells billions of dollar worth in iPhones every year in China. Apple’s earnings could drop by 30% if the company’s products were banned in mainland China.
$16 billion bailout for farmers
President Trump on Thursday unveiled a $16 billion bailout for farmers hurt by his trade war with Beijing, signalling a protracted fight ahead that is already prompting some American companies to shift business away from China.
IMF
A study released by the IMF said that tariff revenue collected from levies on Chinese goods “has been borne almost entirely” by US importers.
China and the US have been engaged in a trade war for more than a year. In that time, they have targeted billions of dollars worth of goods with high import tariffs. However, “there was almost no change in the (ex-tariff) border prices of imports from China, and a sharp jump in the post-tariff import prices matching the magnitude of the tariff”.
Next Threat by the US
Trump has also raised the possibility of raising tariffs on an additional $300 billion in Chinese goods. This, according to the IMF, could hurt consumers as companies are likely to pass on the additional cost.
Next Meeting
Trump also said he will meet with China’s President Xi Jinping when they attend the G-20 meeting next month in Japan.
Our View
President Donald Trump needs to cut a trade deal with China because his re-election prospects rest on keeping the stock market and the economy strong. He cannot afford to let that slip. He knows it. His political advisors know that. A year from now, we can’t be lower on the stock market than we are, and the US economy has to be better. So it’s up to Trump make a deal.
Disclaimer: This article was issued by Kristian Camenzuli, investment manager at Calamatta Cuschieri at Calamatta Cuschieri. For more information visit, https://www.cc.com.mt/ . The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.