Dow Jones index woes amid renewed trade war
The trade war truce apparently wasn’t meant to last as U.S President Trump has slapped China with another round of tariffs. Following the announcement, the Dow Jones Index has dropped by 3% and the outlook is grim for the U.S stock market.
The latest tariffs of 10% duties to be paid on $300 billion Chinese goods to which Beijing will purportedly retaliate with a trading embargo on all agricultural imports from the U.S.
It’s important to note that China is the top export market for U.S hay and soybeans – accounting for more than 18% of all U.S agricultural exports worldwide.
Bad news for U.S farmers
The trade war has hit farmers the most and while 2017 U.S farm exports to China totaled $19 billion, the post-tariffs 2018 revenues were decreased dramatically to $9 billion. The impetus to the renewed tariffs on Chinese imports to the U.S was none other than China’s failure to keep its promise to boost its purchases of U.S farm products.
China’s response, of course, was to block all agricultural imports from the U.S – cutting out the already struggling farmers from one of their largest markets.
Fear and uncertainty for the dollar and global outlook
While Trump has been criticizing China’s monetary policies of deliberately keeping the Yuan weak to gain an edge in exports, his latest announcements have sparked renewed volatility in the global markets sending the dollar on a nosedive. In fact, the DXY index, which tracks the performance of the dollar against that of all other major currencies, has shown a sharp decrease as well, mirroring that of the Dow Jones Index.
Trump may be denying any negative claims to his policies, but the escalating trade war is just starting to take its toll on the U.S economy which has been performing remarkably so far this year.
Tech companies on NASDAQ are also feeling the downwards pressure from the risk-avert investor sentiment with Apple and Nvidia plummeting by 4% and 6% respectively.
The effects of the trade disputes have also reverberated across the financial markets with the FTSE in Europe losing more than 2% of its recent gains and the Stoxx Europe 600 well on its way to its worst performance in more than a decade.
The stock markets in Tokyo and Hong Kong have also slowed down by 2% and with the Yuan forecasted to weaken even further, we can expect further volatility before and if a correction will take place.
Looking towards safe-haven assets
As is always the case when fiat currencies are struggling, Bitcoin enthusiasts rejoice. A sharp 22% increase in BTC/USD – currently trading at 11605.14 shows reinvigorated interest in Bitcoin since the beginning of the month and is proof enough that while major markets battle it out and emerging economies take the hit; investors look to diversify their assets into cryptocurrencies and other safe-haven commodities.