China & the US Continue to Clash

As we saw in May, the China-US trade negotiations to an unexpected turn which resulted in the US launching an irrational, hot-headed campaign against private tech company, Huawei. As a result, both economies face some harsh realities. But why were these negotiations unsuccessful in the first place?

As April drew to a close, Trump broadcast to the Twittersphere that an agreement was about to be reached. An invite was extended to Xi to seal the deal.

Beijing had little to comment on the matter and offered no indication that an agreement had in fact been made. Rather, Beijing had toughened their position and flexed some muscle in insisting that talks take place on more common ground. Vice Premier Lui He emphatically suggested that if any agreement is to be reached, then it must be equal and mutually beneficial – with no compromise on principles.

It seems that a distinct lack of trust coupled with excessive demands from the US are the reasons that neither China or the US can strike a deal. The United States are faced with the pressures of a socialist reform that demands for a more equal distribution of wealth, which will no doubt present themselves as major discussion topics in next years presidential election campaigns. With scapegoating being the name of the US game, China has become an all too convenient enemy with their different ideological and political practices.

With both the Dems and Republicans keen to boast their willingness to be tough on China to secure presidency, the risk is that going forward the US will no doubt harbor an ongoing hostility towards China, with relations likely to deteriorate into a ‘Cold War-esque’ state.

After failing to reach agreement time and time again, the trade war has escalated into a technology war. Even if an agreement had been met, US security jocks would still ban Huawei and many other Chinese tech companies in the interest of ‘National Security’.

It comes down to the 2020 US election. In order for Trump to win, he NEEDS an agreement. Without such an agreement the behemoth US agriculture and energy sectors, Wall Street and US companies that are heavily invested in China.

Of course, China also hopes for an agreement so as to ensure continued economic growth, and to stabilize relations.

With these periods of volatility expected to continue well into the medium term, it presents plenty of trading opportunities for retail traders, which makes it a good time to test the waters with a forex demo account with Vantage FX, the leading regulated Forex broker where you can trade USDCNY and try to capitalize on Trumps next Tweetstorm.

Source: Vantage FX Blog