China have issued a declaration saying demands by the Trump administration for structural changes to China’s state run economy seek to compel China to damage it’s own core interests.
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It looks as though Trump's demands such as an end to alleged forced technology transfers and a halt to subsidies for state owned firms will only escalate the trade war. China has stated the demands are not up for negotiation.
A Chinese representative stated the following.
"At the negotiating table, the U.S. government has made many arrogant requests, including restricting the development of state-owned enterprises,"
"Obviously, this is beyond the field and scope of trade negotiations, (and) touches upon China's fundamental economic system."
"This demonstrates that behind the trade war the U.S. has launched against China, there is an attempt to violate China's economic sovereignty, (and) compel China to damage its own core interests."
Not only does this not bode well for the US, Chinese and the global economies as the world’s two largest economies engage in a trade war that is now getting out of control.
Trump has already said he intends to implement a huge tariff increase in June. Trump has stated he will more than double current tariffs on $250bln worth of Chinese goods.
Despite the US instigating the trade war the greenback is gaining strength. Investors are leaning away from riskier commodity based currencies in favour of what are deemed to be safe haven currencies. The US dollar is proving to be the destination of choice.
Sterling is under increasing pressure due to the current political situation and the lack of any clarity on Brexit. If you have a currency requirement involving purchasing the US dollar and have to move short to medium term it may be wise to take advantage of current levels.
Tomorrow we will see the release of US Gross Domestic Product (GDP) data, which is a key indicator for the health of the US economy. Year on year data is expected to show a decline of 0.1% to 3.1%. Unless the data lands away from expectations I would not expect a huge movement in US dollar value.
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