This week, as with last week, the U.S. dollar will be focused on simmering tensions between the two world economic superpowers. Both China and the United States continue to make investors jittery with comments over the simmering trade spat between the two nations. These tension make investors worry that a trade war will hinder global economic growth and hurt the improving economy of the United States.
Overnight, President Donald Trump, according to Reuters News Agency, suggested that China will ease trade barriers. This is “because it is the right thing to do“. He said that the United States and Beijing can settle disputes that have roiled the global financial markets, consumers and corporations.
A new tweet from the U.S. President does not really does not explain why President Trump is optimistic about resolving an escalating trade spat between the world’s two largest economies.
President Xi and I will always be friends, no matter what happens with our dispute on trade. China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property. Great future for both countries!
— Donald J. Trump (@realDonaldTrump) April 8, 2018
Dollar Traders are Quite Aware how the U.S. Relies on China
Traders are quite uneasy as both countries are quite interdependent. The United States bought more than $500 billion in goods from China last year. The U.S. is planning, or considering, new duties on almost $150 billion of those imports. The United States exported nearly $130 billion in goods to China in 2017. That also faces a potentially devastating hit if China responds in kind with tariffs of their own.
China through the Chinese Commerce Ministry and its spokesman Gao Feng, said that China will not hesitate to respond if the United States adds additional tariffs. He also out negotiations under these conditions.
He said that they will “counterattack with great strength” if Trump decides to follow through on his latest tariffs on more than $100 billion in Chinese goods. This comes after China said that they were targeting some $50 billion of imports from the United States.
The Trump administration also plans to crackdown on what they say is China’s theft of U.S. intellectual property.
Conflicting messages have come out, from the American administration, in the recent days. Treasury Secretary Steven Mnuchin has said, even though there is a risk of a possible trade war, he is “cautiously optimistic” that the U.S. and China could reach an accord before any tariffs take effect.
The new White House economic adviser, Larry Kudlow, has said, in an interview, that the U.S. is “not in a trade war“. He also said that “China is the problem. Blame China, not Trump“.