The US-China trade war, ignited in early 2018 under President Donald Trump, is once again heating up. Initially triggered by Trump's imposition of trade barriers on China over allegations of unfair commercial practices and intellectual property theft, the trade war escalated steadily. It culminated in the US-China Phase One trade deal signed in January 2020. This agreement was intended to implement structural reforms and changes to China's economic and trade regime, aiming to restore stability and trust between the two global powers. However, recent developments indicate a resurgence of tensions, as the US seeks to strengthen controls on semiconductor exports to China.
President Trump's administration is reportedly considering additional restrictions on China's Semiconductor Manufacturing International Corporation (SMIC) and ChangXin Memory Technologies (CXMT). This move follows a series of meetings between US officials and their Japanese and Dutch counterparts, where they discussed plans to restrict Tokyo Electron and ASML engineers from maintaining semiconductor equipment in China. Such measures could significantly impact China's semiconductor industry, which is crucial for its technological advancements.
Further complicating matters, the US is contemplating stricter controls on Nvidia chip exports to China. These potential measures reflect mounting concerns over China's growing capabilities in the semiconductor sector. In response to perceived threats, China has retaliated by imposing tariffs on a variety of US goods, including automobiles and soybeans. This tit-for-tat approach underscores the persistent volatility in US-China trade relations, with both nations adopting policies that ripple across the global economic landscape.
The ramifications of this trade war have been profound. Disruptions to global supply chains have ensued, leading to reduced spending, particularly in investments. The trade war's impact is also visible in consumer markets, as it has directly contributed to inflationary pressures within the Consumer Price Index. Companies around the world are grappling with increased costs and uncertainties, prompting many to reassess their supply chain strategies.
Despite the transition of power from President Trump to President Joe Biden, the trade dynamics have seen little change. President Biden has maintained the tariffs introduced by his predecessor and even added some additional levies. This continuity signals an ongoing strategic stance towards China, emphasizing the importance of safeguarding American industries and intellectual property.
Amid these developments, the US Dollar experienced a recovery from its lowest level since December 10, prompting profit-taking amid slightly overbought conditions. This turnaround has also had implications for currency markets, notably supporting the AUD/USD pair amid renewed trade war fears.