Will Trump's Tariffs Strangle the Asian Economy?
Trade tensions between the United States and China are escalating again, after Donald Trump threatened to impose 100% tariffs on BRICS countries, including China, if they attempt to replace the dollar as the global trading currency. This announcement comes at a critical time for China, which recently showed signs of economic recovery thanks to fiscal and monetary stimulus. Although Beijing's stimulus is starting to sink in, Trump's tariffs with 10% tariffs and possible increases of up to 60% threaten the rising sun's export outlook and its trade balance.
Signs of recovery amid risks
China recorded a rebound in its manufacturing activity during November, with the Caixin PMI reaching 50.3, its highest level in seven months. This figure indicates a slight expansion of the sector, supported by an increase in production and new orders, reflecting the positive impact of the stimulus measures implemented since September. However, this advance could be threatened by renewed trade tensions.
The impact of Trump's tariffs
Trump's announcement of tariffs poses several risks:
1. Export contraction: Chinese products, especially technological ones, would lose competitiveness in international markets, affecting the global supply chain.
2. Economic slowdown: While exports held up in October, an increase in tariffs could cause a significant drop in the coming months, affecting key sectors.
Trump also warned about imposing higher tariffs on Mexico and Canada, suggesting a possible revival of global trade conflicts.
Implications for Asia and the world
The effect of trade tensions is already evident in regional markets. Although Chinese stock indexes, such as the CSI 300 and Shanghai Composite, rose 0.8% following positive PMI data, gains were limited due to global uncertainty. In Japan, the Nikkei 225 and the TOPIX also posted slight gains, despite a contraction in its manufacturing sector.
A50 on Chart
If we look at the China A50 1-hour chart, we can perceive a recovery towards the control point (POC) of 13,441 points. This coincides with the middle trading zone initiated in September. With its high zone at 13,842 and its low zone around 12,921 points. RSI is at a high oversold level of 70.39%. So it is quite possible that the index will reflect the effect of the tariffs and may pull back after contacting the middle zone of the indicated range if things do not change for China-US trade.
A turning point?
China's stimulus strategy has managed to partially stabilize its economy, but it faces limits. With the threat of tariffs, the challenge for Beijing will be twofold: maintaining its domestic growth while weathering a more hostile international environment.
Will stimulus measures be able to protect China from a deeper economic blow, or will Trump's tariffs mark a turning point in its global rise? The future will depend on its ability to withstand these pressures and diversify its economy in an increasingly complicated scenario.
Ion Jauregui –ActivTrades Analyst
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Signs of recovery amid risks
China recorded a rebound in its manufacturing activity during November, with the Caixin PMI reaching 50.3, its highest level in seven months. This figure indicates a slight expansion of the sector, supported by an increase in production and new orders, reflecting the positive impact of the stimulus measures implemented since September. However, this advance could be threatened by renewed trade tensions.
The impact of Trump's tariffs
Trump's announcement of tariffs poses several risks:
1. Export contraction: Chinese products, especially technological ones, would lose competitiveness in international markets, affecting the global supply chain.
2. Economic slowdown: While exports held up in October, an increase in tariffs could cause a significant drop in the coming months, affecting key sectors.
Trump also warned about imposing higher tariffs on Mexico and Canada, suggesting a possible revival of global trade conflicts.
Implications for Asia and the world
The effect of trade tensions is already evident in regional markets. Although Chinese stock indexes, such as the CSI 300 and Shanghai Composite, rose 0.8% following positive PMI data, gains were limited due to global uncertainty. In Japan, the Nikkei 225 and the TOPIX also posted slight gains, despite a contraction in its manufacturing sector.
A50 on Chart
If we look at the China A50 1-hour chart, we can perceive a recovery towards the control point (POC) of 13,441 points. This coincides with the middle trading zone initiated in September. With its high zone at 13,842 and its low zone around 12,921 points. RSI is at a high oversold level of 70.39%. So it is quite possible that the index will reflect the effect of the tariffs and may pull back after contacting the middle zone of the indicated range if things do not change for China-US trade.
A turning point?
China's stimulus strategy has managed to partially stabilize its economy, but it faces limits. With the threat of tariffs, the challenge for Beijing will be twofold: maintaining its domestic growth while weathering a more hostile international environment.
Will stimulus measures be able to protect China from a deeper economic blow, or will Trump's tariffs mark a turning point in its global rise? The future will depend on its ability to withstand these pressures and diversify its economy in an increasingly complicated scenario.
Ion Jauregui –ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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