US-China trade row developing into worst-case scenario: report

The ongoing US-China trade war is developing into a worst-case scenario, according to a report published by a local brokerage on Monday, citing that China has begun settling into a trade war of attrition.

According to Hana Financial Investment analyst Kim Kyung-hwan, the global market is now exposed to further uncertainties stemming from the trade feud, as it is on the verge of entering a new stage, while negotiations between the two largest economies remain largely stalled. 

“With China recently adding tariffs ranging from 5 to 10 percent on US goods, and US President Donald Trump hitting back, the market is now vulnerable to uncertainties, including that of the 13th round of trade talks between Washington and Beijing slated for September,” Kim said.

“Unlike Trump who has to keep the 2020 Election and approval rate in mind, his Chinese counterpart Xi Jinping is likely to believe maintaining a long-term policy is beneficial for the duration of his term,” he added.

Kim cited China’s latest moves to allow the yuan to fall below the psychologically important level of 7 per US dollar for the first time in more than a decade and an effort to keep its pressure on Hong Kong on a certain level as signs that Beijing is actually focusing on a long-term policy, while externally countering the US’ moves.

By Jung Min-kyung (mkjung@heraldcorp.com)