Looming trade war troubles China
China’s stock market took a massive blow on Tuesday amidst fears of a trade war with the United States. Over a thousand stocks fell by more than 10%, and the Shanghai Composite Index dropped below 3,000 – its lowest point since 2016.
Following the confirmation of President Trump’s announcement that the U.S. will impose tariffs on $50 billion worth of Chinese goods, China announced that it would impose its own tariffs on the same amount of U.S. goods. Trump then fired back, stating that if China does retaliate, the U.S. will impose an additional 10% tariff on $200 billion worth of Chinese goods.
Chinese investors are rightfully apprehensive about the possible trade war between Beijing and Washington. Even foreign investors have sold most of their Chinese stocks, and although market prices are at an all-time low, bargain investors still want nothing to do with Chinese equity.
Even if China does retreat from the potential trade war, this action alone will not fix its economy. Analysts believe that China still needs to mend its monetary policy to better satisfy investors – the country has tightened
Featured Image via Flickr/Global Panorama
