US-China Trade War Impacts Global Economies, Hits Russia

US-China Trade War: Markets around the world are falling after the initiation of US-China Trade War. The trade war between the US and China – the two largest economies in the world is bound to create trouble for many other nations, including Russia.

The beginning of US-China Trade War started when US President Donald Trump announced plans to introduce duties on the import of goods from China worth a total of $ 60 billion. This is the response to the theft of technology, which the US authorities accuse the Chinese organizations, according to Donald Trump

US-China Trade War: What Can Happen?

The Wall Street Journal writes, citing its sources, that China is preparing a response to US actions and US-China Trade War. They can affect US agricultural exports, including soybeans, sorghum and live stocks. The US is one of the largest suppliers of these goods to China, the newspaper said.

China, in particular, plans to introduce an additional 25 percent import duty on American pork, Bloomberg reports with reference to the Ministry of Commerce of China.

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The markets reacted to the plans announced by Trump with a sharp decline. The American Dow Jones index fell by 2.93% on Thursday, the S & P – by 2.52%. Asian markets reacted even more seriously – Japanese Nikkei falls by 4.5%, Hong Kong’s Hang Seng – by 2.4. The European Stoxx Europe 600 Index has fallen to the lowest levels since February 2017.

“The prospect of US-China Trade War has brought down financial markets,” the morning review of Raiffeisenbank said. Fears of trade wars undermine investors’ interest in the currencies of developing countries, the Nordea bank’s morning report says.

The index of the Moscow Stock Exchange opened with a decline and in the morning fell by almost a percentage, but then began to strengthen due to news about the reduction of the key rate of the Russian Central Bank. At 13:38 Moscow time it fell by 0.55%, the RTS index – by 0.49%. The ruble is slightly strengthening against the dollar due to the rise in oil prices.

“Russian markets are clearly falling after the global markets,” says Maxim Shein, chief strategist at the BCS. He believes that the stock market decline will end soon unless other negative events occur, but instability will continue.

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“The reaction of investors and speculators is to get assets from emerging markets, although they seem to have nothing to do with it directly,” Shein explains. According to him, Russia’s involvement in world trade wars will not have a big impact on its economy. The entire trade turnover of Russia is about 400 billion dollars a year, and its main trading partner is the countries of Europe.

US-Russia Trade War

Nevertheless, Russia has already become a party to the “great trade war”. In early March, Trump introduced increased duties on the import of steel – 25% and aluminium – 10%. But the United States on Thursday announced that they will mitigate their actions.

In fact, we are talking about the cancellation of duties for European, Australian, Argentine, Brazilian and South Korean producers. On Russia and China, the indulgences did not spread.

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Russia and China appealed to the World Trade Organization. On Friday, the WTO discussed these complaints. The US tariff policy at the meeting was criticized by the EU countries and other states.

On Friday evening, WTO Director-General Roberto Azevedo said that restricting international trade would create a threat to the world economy, the restoration of which, he said, remains fragile. Russian companies Evraz, NLMK and TMK have assets in the US, where the introduction of duties may be reflected negatively.

In addition, the Russian authorities are preparing retaliatory measures. This refers to restrictions on American goods in response to US duties on steel and aluminium, said on Friday the State Secretary – Deputy Minister of Industry and Trade Viktor Yevtukhov.

On the air of “Russia 24”, he estimated the losses of Russian metallurgists from the introduction of duties in the US about $ 2 billion for steel and $ 1 billion for aluminium. “This is due, among other things, to the fact that our companies have invested in rolling capacities in the US and are using Russian semi-finished products for the production of final products,” Interfax quotes Yevtukhova.

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According to the official, the closure of the US market for imported steel and aluminium can lead to a “chaotic redistribution” of products from countries that have suffered from these measures, and the introduction by other countries of their own trade protection measures.

According to Shein, the effect of tariff growth in the US as a whole on the Russian economy will not be so great. Sanctions, he said, are much more influential than tariffs imposed by the United States. Nevertheless, Russia can indirectly suffer from the growth of trade barriers in the world, the analyst adds.