Stocks in Asia plummet following the intensifying trade war between the US and China. Just recently, the Hang Seng Index fell 1.7% for the week and 7.4% for the month. It is the biggest monthly drop since May.
In light of the ongoing controversy, the Chinese yuan is being closely watched. Both onshore and offshore yuan fell. The offshore Chinese yuan last traded at 7.1510 and the onshore Chinese yuan is at 7.1418. These numbers were recorded after the People’s Bank of China set official midpoint reference at 7.0570 per dollar.
According to Asia at Westpac Banking Corp’s Francesca Cheung: “We haven’t really seen any strong signal that the PBOC is trying to stabilize the market. In general, the dollar-CNY has already passed the 7 level, 7.10 level, so all these burdens are out of the way. So in theory, there is higher flexibility for the (yuan) to just follow market forces.”
For the past year, the world’s two largest economies have been involved in a trade war that has sparked fears of global recession. Both the U.S. and China have imposed tariffs on billions of dollars on each other. This stemmed from Trump’s accusation of unjust trading practices of China including citing intellectual theft against the Asian country.
The US president imposed tariff policies in a bid to encourage citizens to support American-made products. He has been rallying to bring companies home and make products in the U.S.A.
In one of this tweets last week, he urged U.S. companies to find alternatives to China. After his Twitter spree, the DOW Jones Industrial Average fell by 600 points. However, the DOW was able to recover 300 points.
He has even ordered all US postal carriers to refuse deliveries of Fentanyl from China. These included the United States Postal Office, Amazon, UPS, and FedEx.
In response to Trump’s orders, a FedEx spokesperson said: “FedEx already has extensive security measures in place to prevent the use of our networks for illegal purposes… we follow the laws and regulations everywhere we do business and have a long history of close cooperation with authorities.”
A few days ago, U.S. President Donald Trump revealed that China has contacted US negotiators following the trade war mishap. However, Trump stated that it will continue to hike tariffs from 25% to 30% on $250 billion worth of Chinese goods. This will take effect on October 1. Also, tariffs on another $300 billion Chinese goods will be increased from 10% to 15%. These duties will be imposed on September 1 and December 15.
At the G7 Summit in France, Trump claims he has no regrets. He added he can raise the US-China trade war into a national emergency. As a response to Trump, Beijing imposed new tariffs on $75 billion worth of goods.
“Sadly, past administrations have allowed China to get so far ahead of fair and balanced trade that it has become a great burden to the American taxpayer. As president, I can no longer allow this to happen,” said US President Trump in a tweet.
The United States Treasury Secretary Steven Mnuchin stated that Chinese negotiators might visit Washington for trade negotiations, but declines to affirm if the meeting slated in September will still take place.
“We continue to have conversations. We’re planning for them to come,” states Mnuchin.
“We’ve had conversations with the IMF and directly with our counterparts in China, including the governor of the People’s Bank of China (PBOC). We will have a separate dialog and discussion on currency as part of the trade discussion but separate from the trade discussion,” Mnuchin added.