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Article Overview

 

●       The Sino/US trade war has been going on since  mid-2018.

●       We will be going into 2020 with the war of the worlds

●       The global economy could continue to falter unless substantial progressis made

●       We expect the trade war to come to a wrap in the first half of 2020

  Trade War has been going on since 2018

The Sino/US trade war has been going on for over a year and a half. During Trumps 2016 campaign,he ranted about how China has been taking advantage of the US. I don’t disagree either, but I’ll save my opinions for later.  Things escalated in May 2019 when Trump effectively banned Huawei by issuing a national security order. China in turn, has blocked US tech companies. We have seen this pattern repeat itself since it has started. Two powerful countries in a giant tit for tat tariff match. 

We are now at theend of 2019 and both the US and China applied tariffs on hundreds &hundreds of billions of dollars of goods & services. Is there an end insight in 2020?

Total US tariffs on China= $550 billion

Total Chinese tariffs on US $185 billion

We will be going into 2020 as the war of the worlds

There is a HIGH chance Trump and Xi will ring in the new year with tariffs still their countries. Phase 1 is still currently underway. News headlines have been going wild and has sent the market into a confusion. Trumps administration continues to stress that China & US are in the “final throes” and “China wants to make a deal”. Yes, we have heard numerous times that a deal is supposedly near but what about all the push back from China? The most recent negative rhetoric comes from both the United States and China. After the US passed the Hong Kong and Uygur bill,we have seen disheartening rhetoric about “retaliation” . There is a chance that 2020 could continue to be a crazy ride with the trade war, but there are reasons to be optimistic.

 The global economy could continue to falter unless substantial progress is made

The global economy could continue to falter unless progress is made. Many developed countries have cut interest rates due to the trade war rippling through their economies. Here are a few:

Countries that reduced rates

·       United States

·       Australia

·       New Zealand

·       South Korea

Canada has been the only economy that hasn’t cut rates, but things could change for BoC Governor Poloz in 2020. Many countries are so connected to the Chinese economy. Take Australia for example, Australia exports $85 billion worth of goods and services to China. It is their #1 export destination. China farts and the rest of the world smells it! In other words, China falters and it can ripple over into other economies. This is what we have seen across the board with emerging markets and developed economies.

Australias #1 export destination is China

We have seen a fair amount of risk leaving the market due to optimism surrounding the phase 1 deal. There is still not enough clarity on whether or not phase 1 will get signed before the year is out. The next tariff deadline is December 15th. Trump is expected to put another round of tariffs on China. This time, $156 billion in Chinese goods! 

 

We expect the trade war to come to a wrap in the first half of 2020

We are optimistic that the Sino/US trade war will eventually wrap up in 2020. When? Well it could be hard to time, but we potentially see Q2 as being the potential days. Of course, things could escalate further, China could test the limits and push it until after the election or continue with their defensive tactics. The same goes for the US, Trump has already stated that he is fine waiting until after the election. Understanding these fundamentals will greatly benefit your Forex trades.

 

There does come a time when markets get too fearful about a current market environment and things change paths. Eventually things come to an end, whether its Brexit, Trade or a recession! Its about understanding the bigger picture and not getting caught up in the day to day headlines. That’s enough to make someone’s head spin. We have stepped back, acknowledge our current state in this peculiar time and have looked for lights at the end of the tunnel. Forex Fundamental analysis should be the backbone of your trades. 2020 will be a good year!

 

Posted 
December 9, 2019
 in 
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