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US-China Trade Threats Continue to Escalate

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Trade dispute escalates further

On September 14, according to Bloomberg, Donald Trump indicated that he wants to move ahead with tariffs on $200 billion in Chinese imports despite his administration’s attempts to resume trade talks with China. Markets are worried about the next round of tariffs, as these could seriously escalate tension between the world’s two largest economies.

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Bilateral talks in question

Moreover, if the United States (SPY) (IVV) goes ahead with the tariffs, China may not continue to participate in bilateral trade talks. According to CNBC, Chinese tabloid The Global Times reported that China will not be content with playing defense in the escalating trade war. It wrote, “It is nothing new for the U.S. to try to escalate tensions so as to exploit more gains at the negotiating table,” adding that “we are looking forward to a more beautiful counter-attack and will keep increasing the pain felt by the U.S.”

China’s retaliation

The United States and China (FXI) (YINN) have had several rounds of trade talks without any significant agreements. According to The Republic, Sina.com reported that former finance minister Lou Jiwei, while speaking at an economics forum on Sunday, said that apart from retaliating through tariffs, China could restrict the export of raw materials and other components essential to US manufacturing supply chains. He said, “Only knowing the pain of fighting will stop the war and cause (the United States) to negotiate seriously.” We’ll discuss China’s strategy further in the next part of this series.

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