Relationship between the two largest economies does not bode well. The Trump administration memorandum released on Thursday to impose 25% tariffs on Chinese imports worth USD 60 billion is worrying investors.
The first signs are already in place: Hong Kong Hang Seng sells off -2.95%, hampered by IT (-6%) while China CSI300 dropped by -2.87%. On Japan side, Nikkei 225 dropped by -4.51%, followed by Topix (-3.62%).
Chinese retaliation measures did not take long to come as Chinese trade ministry communicated its willingness to impose tariffs on US imports on pork, fruits, nuts, wine and other construction-related products. Additionally, China is planning to initiate infringement procedures to the World Trade Organization concerning recent introduced iron and aluminum tariffs. The outcome won’t probably get anywhere, everything is about baring the teeth and putting economic matter aside. It is only a matter of time until the situation will be cooling down.
In spite of current political tensions between both nations, we see the USD/CNY strengthening in the short-term, currently trading at 6.32 and expected to head along the 6.33 range.
By Vincent Mivelaz