On September 1, 2019, the U.S. will be “putting a small additional tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our country,” tweeted President Donald Trump. “We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one,” he added.
That followed another round of failed talks between China and the U.S.
China then retaliated, halting all imports of U.S. agricultural products.
“The leverage that China has is its large agricultural purchases,” Darin Friedrichs, a senior analyst at INTL FC Stone’s Asia commodities division, as quoted by Bloomberg. “This does affect U.S. farmers and the rural U.S. voting base that’s normally in support of Donald Trump. If they hit back before the election, that’s the obvious way to retaliate.”
China Also Allowed the Yuan to Sink to a Decade Low
Not backing down, China also allowed the Chinese yuan to sink to its weakest level in over a decade, as it looks to cushion the blow from all of the tariffs. In response, President Trump tweeted, “"China dropped the price of their currency to an almost a historic low. It’s called “currency manipulation. Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!"
Worse, Tariffs could Force the Global Economy into a Recession
According to Morgan Stanley, more tariffs could force the global economy into a recession.
In fact, according to a new report released today, “current tariffs, if implemented and in place for four to five months, would cause global growth to weaken to 2.8% to 3% despite lower interest rates from central banks around the world. If the U.S. were to raise the tariffs to 25% from 10% and hold them there for four to six months—and if China were to respond—the global economy would enter recession in three quarters.”
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