The US-China trade war, initiated in early 2018 under the administration of President Donald Trump, is poised to escalate once again. The conflict began when President Trump imposed trade barriers on China, citing unfair commercial practices and alleged intellectual property theft. Despite a temporary reprieve with the signing of the US-China Phase One trade deal in January 2020, recent developments suggest a return to tit-for-tat policies that could disrupt global supply chains and fuel inflation concerns.
The US-China Phase One trade deal required China to implement structural reforms and other changes to its economic and trade regime. The agreement aimed to restore stability and trust between the two economic powerhouses. However, President Trump's recent comments indicate a renewed willingness to engage in a trade confrontation. He warned that tariffs would be "very, very substantial" if no new agreement is reached and expressed an expectation to speak with Chinese officials within 24 hours.
The trade war originally escalated as the US imposed tariffs on Chinese imports, prompting Beijing to retaliate with its own counter-tariffs. In a recent development, China responded to a new 10% US tariff by imposing a 15% levy on US coal and liquefied natural gas (LNG) imports, alongside an additional 10% on crude oil, farm equipment, and certain automobiles. These measures echo the earlier phases of the trade war, which had significant implications for both nations and the global economy.
The resumption of the trade war is expected to impact global economic stability. The tit-for-tat policies between the US and China are likely to disrupt supply chains, leading to potential inflationary pressures worldwide. The reduction in spending, particularly investment, is already being observed, directly feeding into the Consumer Price Index inflation. These developments come at a time when the global economy is grappling with existing challenges, making the ramifications of the trade war even more pronounced.
President Joe Biden, who succeeded Trump, maintained many of the tariffs imposed by his predecessor and even introduced additional levies. As Trump campaigns for the 2024 presidential election, he has pledged to impose 60% tariffs on China should he return to office. This promise suggests that the US-China trade conflict could intensify further if Trump regains power.
Amid these tensions, the New Zealand Dollar (NZD) remains under pressure due to expectations of further rate cuts by the Reserve Bank of New Zealand (RBNZ). The NZD's vulnerability reflects broader market uncertainties triggered by geopolitical tensions. Additionally, a recent correction in a frog-based meme coin has led to over $20 million in liquidations within two days, highlighting the volatile nature of financial markets during such uncertain times.