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US and China – Trade War Rages

US and China - Trade War Rages

The US-China trade war has transformed into a fight between the top two economic powers in what is now the beginning of a protracted event that could leave the world economy in shambles. The Dow Jones lost 400 points on Thursday as the US and China both dialed up the war of words and engaged in finger pointing. 

The China Ministry of Commerce on Thursday said that the US should act with “sincerity” and should change its “wrong actions” toward China. Several US investment firms` strategists released new reports warning that the trade war was getting worse and of course this included Nomura, Bank of America and Goldman Sachs.

The US is now focused on technology companies and as a result these names have been hit hard by selling – the S&P technology sector last 3.3%. As the trade war escalates, there are some analysts who believe that the US index drop could be more than 10 percent.

On May 10 the US raised tariffs to 25% from 10%, on $200 billion followed by threats from President Donald Trump to raise tariffs on another $300 billion of goods from China, again those goods are going to consumers. Some analysts are saying that the Trump White House will move ahead on this tariffs and clearly the Hawks in China are now in control, so they will likely answer with tariffs of their own.

This article was based on a CNBC report by Patti Domm. There is a growing conversation, one from Lewis Alexander, a Nomura chief US Economist who said that there could be a truce between the US and China after the G20 in Tokyo. This war is turning out to be worse than expected, and there could are some shocking results by next quarter, perhaps a slowdown in the global economy. More on this subject in the coming weeks.

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