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China Fighting Trade War for A Reason

China Fighting Trade War for A Reason

China says it is fighting a trade war with the U.S. for one purpose.

Thus far, the U.S. has slapped duties on about $350 billion of Chinese goods also in December, scheduled to place tariffs on an extra $150 billion.

Trade negotiators between the U.S. and China last week rolled out a structure for the first phase of a trade deal that might see Beijing increase its agricultural purchases to as much as $50 billion annually along with reforming intellectual property practices.

In return, the U.S. agreed not increasing tariffs on $250 billion of Chinese goods from 25 % to 30 % on Oct.15. A decision was not made as to whether the U.S. will go forward with the levies listed for Dec. 15.

The trade war has taken a cost on the Chinese economy, and issues are anticipated to get worse before they get better.

China’s gross-domestic-product grew at a 6.2 % price within the second quarter, the weakest in 27 years. Third-quarter GDP, which is due out Thursday evening, is anticipated to have slowed to 6.1 %, based on economists surveyed by Refinitiv.

It’s not just the hard economic information that’s being impacted by the trade war. There are additionally long-term implications as companies, together with manufacturers of electronics, apparel, and electrical equipment, are uprooting supply chains and fleeing China for neighboring Vietnam, Taiwan, and Thailand in droves to keep away from the tariffs.

“With more extensive and higher U.S. tariffs activated, we anticipate stiffer headwind on Chinese exports,” a team of Hong Kong-based Bank of America Merrill Lynch analysts wrote last month. That may likely thwart capital spending on new factories and equipment even additional and “become the catalyst for policy turnaround,” they added.

The analysts anticipate tariffs to stay in place until the end of next year, causing China’s GDP to slow to 5.7 %.

It’s not just the Chinese economy that’s struggling, although. U.S. GDP slowed to a 2 % development rate within the second quarter, down from 3.1 % within the January-through-March period, and the global economy is anticipated to weaken because the trade war drags on.