The tariffs that the U.S. and China imposed on each other directly hurt targeted firms and sectors abroad as intended, but they also hurt domestic firms, Peter Egger and Jiaqing Zhu write in a VoxEU post. The trade war also has indirectly affected stock prices in the U.S., China and other countries due to global value chains being linked.
How does the US-China trade war affect you?
The other is the US-China trade war, which has escalated into an endless succession of tit-for-tat trade restrictions that began last June. These events impact not only the stock market and trade industry, but also people’s daily lives as they learn to cope with the fluctuating prices of foreign currency, imported goods, and even homes.
Why the US-China trade war may cause a bear market?
Why the US-China Trade War May Cause A Bear Market. As the U.S. economy continues to grow and the bull market in stocks charges on, investors apparently are underestimating the negative impacts that a trade war between the U.S. and China may unleash. This may be a big mistake, according to analysis by FactSet Research Systems.
How has the trade war affected the global economy?
The first bit of good news, or at least not too bad news, is that the trade war has not had a significant impact on GDP. Oxford Economics estimates US 2019 GDP might have been cut by 0.1-0.2% and China GDP by 0.3-0.5%.
How have US and Chinese tariffs affected the global stock market?
This column scrutinises global stock market responses to assess the effects of the trade war and finds that, on average, the US and Chinese tariffs have directly hurt targeted firms/sectors abroad as intended, but they have also hurt firms at home.
How will a trade war with China affect the stock market?
The overall impact of the trade war on the stock market was the same. There was no significant difference between sectors. These results suggest that the effect of the trade war on the Chinese stock market was mainly contagion effect.
How does the trade war between US and China affect financial markets?
A 2019 report from Bloomberg Economics estimated that the trade war would cost the U.S. economy $316 billion by the end of 2020, while more recent research from the Federal Reserve Bank of New York and Columbia University found that U.S. companies lost at least $1.7 trillion in the price of their stocks as a result of ...
What would happen if the US stopped trading with China?
What Happens If China Stopped Exporting? By cutting back on China-made products, raw materials could be greatly reduced. The result of that event will be a commodities market crash, which may crash all financial markets that will plunge the world into a global financial crisis almost impossible to recover from.
How does the US China trade war affect consumers?
American consumers may have felt the consequences of Trump's trade war with China. When companies have to make up for higher costs due to new tariffs, they shift that burden onto consumers. It takes time for these higher business costs to filter down to stores.
How does a war affect the stock market?
Though war and defense spending can amount to a sizable portion of the U.S. GDP, wars often have little sustained impact on stock markets or economic growth at home. Markets largely have ignored recent conflicts related to the Middle East and Iran.
Who benefits most from a US-China trade war?
In Asia, the undisputed winner is Vietnam, whose exports to the United States rose by 35 percent, or $17.5 billion. Another standout, Taiwan, used its long-standing comparative advantage in hardware components to benefit from trade diversion.
What country buys the most from China?
Also shown is each import country's percentage of total Chinese exports.United States: US$521 billion (17.2% of China's total exports)Hong Kong: $313.1 billion (10.3%)Japan: $151.3 billion (5%)South Korea: $135.1 billion (4.5%)Vietnam: $125.8 billion (4.2%)Germany: $103 billion (3.4%)More items...•
Does the US need China?
It supports US jobs. While expanding foreign trade can disrupt US employment, trade with China also creates and supports a significant number of American jobs. Exports to China support nearly 900,000 US jobs, and Chinese companies invested in the United States employ over 160,000 workers.
What if American stores stop buying Chinese imports?
One way or another, our economy would shrink. By how much is hard to say. If 40% of our imports from China disappeared, then 1.26% of GDP would disappear: Imports are approximately 15% of U.S. consumption, and China's share of that is about 21%, so our imports from China represent 3.15% of GDP.
Who benefits from a trade war?
We show that unskilled workers in unskilled-intensive sectors might even benefit from a trade war. The two most important arguments in favour of free international trade are, first, that it offers greater variety to consumers, and second, that it does so at a lower cost.
What are the disadvantages of trade war?
A tariff is a tax or duty imposed on the goods imported into a nation. In a global economy, a trade war can become very damaging to the consumers and businesses of both nations, and the contagion can grow to affect many aspects of both economies. A trade war that begins in one sector can grow to affect other sectors.
What does the US buy from China?
The top U.S. import commodities from China are fruits and vegetables (fresh/processed), snack food, spices, and tea – the combined which accounts for nearly one-half of the total U.S. agricultural imports from China.
Lower Economic Growth and Stock Valuations
"Tariffs hurt the economies of both trading partners by creating inefficiencies and lowering economic growth," FactSet's Hissey writes, per CNBC, adding, "This would have a negative impact on equity market valuations ." FactSet developed three scenarios: a base case with gradually increasing tariffs and trade restrictions between the U.S.
Flight to Quality
"In turn, sudden dramatic falls in equity valuations likely create a flight to quality assets.," Hissey continues in his report, per CNBC.
Limited Consequences
A contrary viewpoint is offered by Andrew Kenningham, chief global economist at Capital Economics, MarketWatch reports. While acknowledging that certain industries are being hurt by a U.S.-China trade war, the London-based economist nonetheless believes that the aggregate economic impact on both countries will be relatively limited.
Why is Huawei banned?
Huawei has been targeted by the Trump administration for multiple reasons: its close ties to the Chinese military and spying apparatus, for violating international sanctions against Iran, and for allegations that it is involved in the theft of intellectual property. The U.S. is urging its allies to ban Huawei products from use in both civilian and military communications applications. U.S. companies are likely to be prohibited from selling to Huawei, similar to the ban placed on Chinese telecom equipment maker ZTE Corp. (ZTCOF) for a time in 2018. When that ban was announced, the shares of key suppliers to ZTE took big hits, per Barron's.
How much is Huawei worth in 2018?
Huawei has grown into a giant international tech player, with estimated fiscal 2018 revenues of $108 billion, and sales in 170 countries, per Barron's. Dan Wang, an analyst with Gavekal Research, believes that widespread bans may badly damage the company.
Is the Cold War escalating?
That's because the technology industry, where America has been dominant, already is becoming a key battleground in a "Cold War" that's escalating between Washington and Beijing. That conflict is likely to intensify, according to a major story in Barron's . "The perception is that too much of the information- and communication-technology supply ...
What are the two international affairs that have disrupted the world economy?
Two international affairs have disrupted the world economy over the past couple of years. The first is Britain ’s decision to leave the European Union (Brexit), which has been lagging since the June 2016 referendum and will remain inconclusive until the end of this month. The other is the US-China trade war, which has escalated into an endless ...
Is the Brexit trade war a comparable war?
Intuitively, Brexit and the US-China trade war are comparable in that they have both affected consumer sentiment in the UK and the US respectively, with UK consumer confidence hitting its five-year low fuelled by Brexit uncertainty and US consumer confidence showing its largest monthly decline in 6 years triggered by trade-war fears.
What is the US trade war with China?
There are two important things to grasp about the US-China trade war. 1. It is going to last for a while. Tariffs tend to hang around once imposed. The US Government is committed to fighting China on trade and IP rights, and a change of US administration will only alter the language, not the stance.
How much did China impose tariffs on?
In 2019, the US imposed tariffs on $360 billion worth of Chinese products; China, in turn, imposed tariffs on $110 billion worth of US goods.
How much has China's GDP been cut in 2019?
Oxford Economics estimates US 2019 GDP might have been cut by 0.1-0.2% and China GDP by 0.3-0.5%. This year, the Covid-19 outbreak will have a far more dramatic effect on GDP in both nations.
How much did Vietnam export to the USA in 2019?
In Vietnam, exports to the USA rose 35.6% in 2019 as Chinese manufacturers relocated their operations overseas. The prime beneficiary of this shift has been Vietnam where exports to the USA rose 35.6% in 2019 as Chinese manufacturers relocated their operations overseas to avoid tariffs. Malaysia, Thailand and South Korea have also benefited.
Which country was the beneficiary of the trade war?
A less widely known beneficiary of the trade war is India. Industrial landlords in India are reporting an uptick in light industrial occupation in their parks, particularly in ancillary automobile industries.
Which countries are the fastest growing trade partners with the USA?
While Vietnam was the fastest-growing trade partner with the USA last year, Austria, France, Belgium and the Netherlands were also in the top 10.
Does the phase one deal cover non-tariff barriers to trade?
The phase one deal does not cover non-tariff barriers to trade, such as subsidies to Chinese companies and procurement rules. Nor does it address a fundamental US bugbear, that of the lack of a meaningful separation of state and business in China.
