Sino-US trade war: Chinese experts debate who will take the biggest hit

Why US market is shrugging off Cohen, Manafort convictions: Peter Cardillo, Spartan Capital Securities
August 23, 2018
Wall St. falters as trade worries weigh
August 23, 2018

Sino-US trade war: Chinese experts debate who will take the biggest hit

NEW DELHI: Who will blink first in the ongoing trade war? There are no easy answers.

But one thing is clear. Stakes are high. The latest is officials from the US and China are meeting to resolve the stand-off on the prickly issue. But that no way has kept both sides from imposing another round of tariffs on each other.

In a pre-emptory move, US President Donald Trump has already said in public that he has little faith in the meeting and does not see the issue getting settled in a hurry.

This has left experts in China wondering who would be a bigger loser.

“There is no winner in a trade war,” said Xiang Ligang, CEO of, a telecom news site.

“But we should have faith that China will not tumble to a worse ground than the US,” Global Times quoted Ligang as saying.

Some support tit-for-tat measures while others have strong reservations about Chinese retaliation, Li Haidong, a professor at the China Foreign Affairs University’s Institute of International Relations in Beijing, told the Global Times.

Stock markets across Asia reacted cautiously to the fresh flare-up.

The spillovers are starting to show up on the currency front, too. The rupee went below the 70 mark on Thursday morning. The local unit has depreciated 8.51 per cent so far this year, the worst among emerging market currencies. Indonesian rupiah (down 7.15 per cent), Argentine peso (7.15 per cent), Chinese yuan (5 per cent) and Korean won (4.39 per cent) all declined during the period.

An August fund manager survey by BofA-ML suggests that the trade war is the biggest risk for the market for the third straight month. Funds are underweight on EM equities, the survey found out.

The trade issues, concerns over emerging market (EM) economies, including Turkey, and a weakening macro environment at home are pinning the rupee down. The consolation is rating agencies do not see any major impact of rupee depreciation on the country’s sovereign rating.

A trade war would surely deal a heavy blow to the US economy, said Sun Liping, a sociology professor at Tsinghua University in Beijing, in March. Liping though had warned that the fight would also test the very survival of the Chinese economy.

China on Thursday reportedly said it will file a complaint with the World Trade Organisation against the US levies.

In spite of the trade cloud, the ongoing bull phase in the US stock market is second longest ever. This is in contrast to 18.5 per cent drop in the Shanghai Composite index during the same period.

“The fundamentals are very strong here in the United States,” Peter Cardillo of Spartan Capital Securities told ETNow.

“When you have the fundamentals in place, you can continue to have a bull market… If the trade war were to intensify, the market would begin to act negatively. It would break the back of strong corporate earnings that the US has been reporting,” Cardillo said.

Faced with a higher interest rate regime, the US economy continues to perform. That’s because rates have still not reached a normalised level. It has given a big push to Corporate America, Cardillo said further.

As far as India is concerned, it is less exposed to a global trade war at this point.

“But oil is clearly a big variable for the Indian market and when it actually crossed $80 and was probably at that point, many people thought it was heading to the $90 level. A sharp fall in oil prices of late has helped India regain momentum. I think it will outperform the emerging markets in the near term,” said Suhas Harinarayananan of JM Financial.