China

Trade dispute slows China’s economic growth

The Chinese economy lost further momentum over the summer months. Economic growth in the third quarter was again lower than in the previous quarter, falling to a new 27-year low of 6.0 percent (y/y). Market estimates were thus slightly missed, but our own somewhat more sceptical expectations came true. The downward trend that began at the beginning of last year with the outbreak of US-Chinese trade disputes has continued. The largest growth losses occurred in industry, which recorded its lowest increase since 1990 in the past quarter at 5.0 percent. This figure would have been even weaker if industrial production had not picked up visibly in September, the month that ended the quarter. We remain cautious, however, as to whether this will signal a reversal of the industrial downturn. On the contrary, as in the course of the year to date, this could conceal government measures that have been brought…

Rare earths: Beijing’s pledge of fist

Rare earths: Beijing’s pledge of fist China exported so few rare earths in September as it has not done for more than two years. Australia, on the other hand, intends to significantly expand its exports of rare earths in the near future, with sales in the United States in particular set to increase. The USA is currently working on a cooperation agreement with Australia to promote the production of rare earths. This is intended to make the worldwide, but above all the US demand for the important metals more independent of the Chinese supply supremacy. For there is great concern that Beijing could impose an embargo on the export of raw materials against the USA, thus using its dominant position as a „weapon“ in the trade dispute – even if the two sides have recently come a little closer to settling the conflict. Rare earths are indispensable for today’s technologies,…

Much ado about nothing? Trump announces partial agreement in trade dispute with China

China and the United States seem to be heading for a partial solution to the trade dispute. The talks between the two countries, which resumed last week, have at least brought a first success. However, in the past two years, in which the conflict gradually escalated, an agreement had often come within reach. But it failed time and again because of unacceptable or hardly realizable demands on both sides and ultimately also because of the volatility of Donald Trump. This cannot be ruled out this time either. According to the US President, the core of the partial agreement is the willingness of the Chinese to purchase American agricultural products worth between USD 40 billion and USD 50 billion per year. The solution will also include higher imports of Boeing aircraft with a volume of up to 20 billion US dollars. In addition, there is said to have been an initial…

New customs dispute between USA and EU: this could become expensive in the end

The US government has announced the introduction of new punitive tariffs against the EU. This time it is about „retaliatory tariffs“, which have even been explicitly approved by the World Trade Organisation (WTO) because of the banned EU subsidies for the aircraft manufacturer Airbus. Customs duties on goods worth 7.5 billion euros are due to come into force in mid-October. The volume corresponds to the WTO decision, but the list of products subject to tariffs published by the US Department of Commerce came as a surprise. It is clear that the countries with Airbus production sites that are responsible for the subsidies in question will also be affected by the US tariffs. These are essentially France, Germany, the UK and Spain. Although passenger aircraft are on the list as expected, they are only subject to a tariff rate of 10%. Aircraft parts or helicopters, on the other hand, are exempt…

Pyrrhic War

The trade dispute develops into a seemingly endless back and forth of tariff increases by the US government and counter-reactions by the Chinese government. The official goal of the USA is to continue to reach a trade agreement with China. The Chinese government’s willingness to talk is to be increased with these measures. Of course, so far the tariff increases have also had an effect. The growth momentum of the Chinese economy has slowed. However, the question remains as to whether the higher US tariffs on Chinese goods will actually affect China to such an extent that in the end far-reaching concessions will be made. The tariffs could also become a boomerang if consumers are confronted with higher prices. If US President Trump’s price gains then fall, the US President could quickly find himself in a state of emergency. The collateral damage of this policy – weaker world growth, lower…

Give and take

What will happen next in the trade conflict between the USA and China? More and more customs threats from the American side, including import restrictions. The Chinese side responds to this escalation with further trade restrictions, a noticeable devaluation of the currency and in the end the Chinese central bank sells its largest pledge, US government bonds. As a result, world trade is going into recession and global economic growth is slowing noticeably. This could be the case, driven in particular by the US. But it doesn’t seem very likely to me. In this scenario, the US economy would record less growth loss relative to China and other export-oriented economies, but the US growth momentum would also weaken. This should have a lasting negative impact on the labor market and the stock markets. By then at the latest, US President Trump will be in need of an explanation, especially in…

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