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Top Three Factors Impacting the Future of U.S.-China Trade

May 4, 2020 by Daniels Trading| Tips & Strategies

On Inauguration Day 2017, the United States entered into a new era of economic policy toward China. Led by the commercially hawkish, nationalistic tone of the Trump administration, U.S.-China trade underwent a sweeping overhaul. Everything from agricultural subsidies to intellectual property theft came under intense scrutiny. The result was an extended period of saber-rattling, tough talk, and tit-for-tat tariff exchanges.

So which issues are likely to impact the annual $660 billion two-way trade relationship? Let’s take a look at three factors that will play key roles in shaping commerce between the U.S. and China for years to come.

1. Coronavirus (COVID-19) Fallout

Early 2020 brought the most severe economic challenge in a decade: the coronavirus (COVID-19) pandemic. Global markets were turned upside down seemingly overnight, with equities, currencies, and commodities experiencing unprecedented volatilities. Suddenly, the U.S.-China trade war was put on the back burner, and a deep global recession appeared inevitable.

The humanitarian cost of COVID-19 has been enormous, and so has the economic price. The world’s financial system came under extreme pressure as uncertainty dominated the global business landscape. In the U.S., unemployment levels spiked as the U.S. Federal Reserve (FED) and the Trump administration turned to massive quantitative easing (QE) and stimulus programs to turn the tide.

Amid the chaos, several questions surrounding post-COVID-19 U.S./China relations began to emerge:

  • Will the U.S. hold China financially responsible for the pandemic?
  • How will a significantly stronger USD impact U.S. exports to China?
  • Will both sides reduce existing tariffs to jumpstart global economic activity?

As of this writing, the COVID-19 situation remains fluid. However, upon its eventual resolution, the questions above may play key roles in crafting future U.S.-China trade relations.

2. IP Theft

A 2017 report from the National Bureau of Asian Research estimated that the U.S. economy loses between $225-600 billion annually in costs related to counterfeit goods, illegal software, and trade secret theft. Subsequently, stopping Chinese intellectual larceny has been a constant talking point from the Trump administration.

By signing the “Phase One” trade agreement in January 2020, China pledged to publish an action plan to mitigate intellectual property (IP) theft. The plan was to establish benchmarks for enforcement of policy against IP theft and harsher penalties.

IP security will be a major issue that shapes the future of U.S.-China trade. If significant progress is not made in this arena, a large-scale rollback of existing tariffs on Chinese exports may not be feasible. As we move past the 2020 U.S. electoral cycle, China’s commitment to IP security will be a key part of relations.
In addition to protecting your health from infection, now is an important time to protect your finances from unpredictable price movements in the markets. View our page dedicated to the news and updates you need to stay informed about how your futures could be affected by the coronavirus (COVID-19).

3. Agricultural Commitments

In 2017, China was the United States’ second-largest consumer of U.S. agricultural exports. Due to heightened tariffs, Chinese consumption of U.S. ag products dropped dramatically from 2017 to 2020.

A major facet of the “Phase One” trade deal was China’s commitment to purchasing U.S. agricultural goods. In the deal, the following pledges were made:

  • China committed to annual purchases of at least $40 billion in U.S. agricultural and related products through 2022.
  • China agreed to eliminate many non-tariff export barriers and improve the structure of the U.S.-China ag exchange.

Of these two issues, China’s commitment to purchase $40 billion annually in ag products is the most important. In the past, these types of commitments have not been honored; should purchases fall dramatically short, further progress on the commercial front will likely be very difficult.

Staying on Top of U.S.-China Trade Relations Is a Full-Time Job

For most of the past four years, the U.S. and China have exchanged blows in an extended trade standoff. Tariffs, negotiations, and strong rhetoric have greatly affected the prevailing market dynamic of many assets. With the onset of the COVID-19 pandemic, the whole game changed.

With so many factors at play, staying on top of U.S.-China trade relations is a full-time job. To learn more about what is happening on the trade war front, check out Daniels Trading’s Insider Market Advisory. Featuring expert analysis, actionable trade ideas, and timely insights, the Insider Market Advisory is a great way to stay abreast of the ever-changing global marketplace.

Daniels Trading and the Coronavirus (COVID-19)

Filed Under: Tips & Strategies

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

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TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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