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U.S. China Trade Update 07/08/2019

July 8th, 2019

Many experts believe that we should have all of the leverage in the trade negotiations, due to the fact that China exports far more to the United States than the other way around. The problem is that the administration cannot decide where to focus our attention – to focus on the trade surpluses of China, or specifically their tech industries. China has been moving up the technological development ladder with their near monopoly on precious earth metals as well as with their tech company Huawei. The U.S. ban on supplying key inputs to Huawei Tech Co. is threatening the next stage of development for them. President Xi’s main condition for restarting negotiations has been lifting this ban. President Trump may not have given them exactly what they want, but he has given Huawei a reprieve for right now.

The U.S. is basically torn between treating China as a rival that must be checked, or a partner that can be trusted. While China on the other hand has been  torn between supporting their domestic and global strongpoints to keep things in line during this trade war. While half of the administration is concerned with surplus and the other half concerned with tech, “President Trump continues to judge them how he judges most countries – GDP, dollars, and DOW points” (Greg Ip of the WallStreet Journal).

So how has this affected the trade gap? Well, we are still waiting to see what the reprieve on Huawei will do and when that will hit us. But from what we can tell so far, it has not been good. The trade deficit has widened and is now sitting at a five-month hi. The gap now sits at 8.4% – $55.5 billion. The gap is proof that this war is hurting our economy. Many Economists expect second quarter growth to slow to a 1.8% annual pace from a 3.1% pace in the first three months of the year. The bright side of things that our domestic unemployment filings have fallen for the second time in three weeks. Not only this but the labor market is holding up as well. It is important to stay up to date with what is happening during these troubling times, that way you can be even better prepared for what you may need to do with your money if there every comes a time for a change of location.