Will China – US trade war affect the economies of other countries? Briefly, yes. However, in the many analysis thus far, it seems that the trade war may actually benefit trade partners of both China and the US as these countries will likely be the intermediary to facilitate the trade between both of them. Else, Americans are going to have to buy very expensive goods indeed. Perhaps we can see what happens to their inflation numbers by the end of 2019 to understand too. The US claims that China is not a ‘fair’ trade partner, that’s how it has such a huge trade surplus versus the US. Now, this is a very serious label and Malaysia is now in one same list as China under a WATCHLIST for CURRENCY MANIPULATION.
Article in cnbc.com here Nine nations — China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore and Vietnam are on a monitoring list. This is a watchlist for potential currency manipulation. Fortunately, at the moment, no country meets the criteria of manipulating their currency for trader advantages. Not even China, yet. All these countries have trade surpluses with the US. Two countries under the watch list previously have been removed. They are India and Switzerland. Under a 1988 law, the Treasury Department is required to report to Congress every six months on whether any countries are manipulating their currencies to gain trade advantages over the United States. Such a finding could lead to trade sanctions. A 2016 law expanded the criteria Treasury was to use in making its assessment.
Currently, the trade war between the US and China happened because the U.S. says that China is stealing technology, unfairly subsidizing its own companies and forcing U.S. companies to hand over trade secrets if they want access to the Chinese market. Thus, President Trump has vowed to reduce the trade deficit with China and has imposed tariffs on Chinese goods. China has retaliated by imposing tariffs on U.S. goods including sales of agricultural products such as soybeans. Article in cnbc.com here
Statistically, the U.S has been having trade deficits since 1970s. This meant that most countries which are trading with the US would have a trade surplus. One major reason is because of consumption. Americans love to buy stuffs and they could not produce enough, thus they have to import from other countries. Malaysia exports more to the US versus imports and one latest number as at March 2019 was US$6.14 billion deficit to the US. Here’s that report. So, the question we want to have is whether Malaysia – US trade war may happen. At US$6.14 billion per quarter, I think the likelihood is going to be low. Even if it slapped a tariff of 20% on 100% of all goods, that will still be a very small number. As for the China – US trade war, let’s hope it gets cooler by end of June when both the leaders meet. Hopefully they will meet. Happy following.
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