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.
