On May 10th USA raised tariffs on $200 billion worth of Chinese exports to US and will shortly start a process aiming at rising tariffs from $200 to $300 billion on June 17th, 2019. In contrast, China will raise tariffs on $60 billion worth of US exports effective on June 1st, 2019.

The trade war escalation caused a negative impact on the agricultural commodities such as the US soybeans with the exports to China dropping. In contrast, the Chinese nation is under financial pressures and the government aims to ease lending conditions to minimise the level of such impact.

What is the risk if tariffs remains active in the second half of 2019?
1. Global investments are likely to insert a negative territory.
2. Asian economies will be affected by slowing Chinese imports.
3. EU and the US economies will feel the pressure for global demand on their exports.
4. US consumer demand is likely to slow down.
5. China manufacturing capacity will be relocated away (negative for the Chinese economy).

Alternatively, in the case of a positive scenario the conflicts could cease during the second half of 2019.

 

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Christos Nikolaou

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