Tuesday, July 23

Confrontation between the United States and China is damaging the stock market

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How dangerous is the confrontation between the United States and China for the stock market?

The trade war between the two Powers continues, and its consequences are felt in almost all countries. The warring parties themselves are also struggling – the U.S. and China’s confrontation is causing financial losses. According to the analysis of the situation by the Federal Reserve Bank, the U.S. stock market has lost about $1.7 trillion.
The trade conflict has a serious impact on the value of shares of Chinese and American companies. Higher duties, new sanctions, breakdown of negotiations – all this instantly sets the stock markets in motion, quotations rise and fall sharply.
Experts also note that investment activity has also suffered – the inflow of investments has decreased, as many are afraid to finance new projects because of the instability of the situation. As a result, the value of securities on the stock market has decreased by 6%, which is $1.7 trillion in money equivalent. Of this indicator, 3.4% fell on direct losses due to some or other tariffs that were introduced in the process of trade confrontation. The remaining 2.6% is classified by analysts as secondary effects.
For a long time the USA and China used the introduction of duties on various goods as an instrument of manipulation and pressure on each other. When it became clear that the situation was affecting everyone, they decided to start negotiations. The first stage of signing the trade agreement between the powers took place in January. Then, in the course of long negotiations, a number of issues were resolved. The U.S. left behind a 25% duty on Chinese goods, whose value is $250 billion annually. The 7.5% tax applies to Chinese products worth $120 billion.

In addition, the countries have agreed that China will purchase $75 billion worth of industrial goods, $50 billion worth of energy and $40 billion worth of agricultural products from the US. Besides, for $35-40 billion China undertakes to buy various services from American companies within 2 years. According to Washington, compliance with these conditions will restore the trade balance between the countries, as in recent years the difference was hundreds of billions of dollars, which had a negative impact on the economy.
China and the U.S. have repeatedly stated that they are fully ready to comply with these agreements and are interested in an early resolution of the conflict situation. In reality, however, the picture is not quite optimistic. China accuses the U.S. of using protectionism, which hinders the implementation of all provisions of the treaty. In turn, the US accuses China of withholding information about the coronavirus and methods of fighting it.

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