The trigger points of commerce between America and China have evolved, ensnaring not only tariffs but also semiconductors, aerospace, and organic goods. This kind of event has created uncertainty in the international market, thus pulling the dollar towards depreciating, and as a result, the price of gold shot up like never before.
What the Markets Are Telling Us About Trade War Escalation
Stocks in Asia slid Wednesday as US restrictions on chip sales to China bit that little harder in the form of the artificial intelligence tentpole Nvidia. It highlights the coming consequences of the expanding global trade war. Gold reached a new ceiling sale at that exact moment, and developed currencies obtained a haven.
Allegedly, Nvidia didn’t inform at least some of its key customers about the new US export rules before their official announcement. The regulations, which the company said were communicated about a week earlier, mandate licenses for the sale of its AI chip to China.
First-quarter growth in China was far better than expected, driven by resilient household consumption coupled with industrial supply. However, analysts cautioned that risks from US tariffs could quickly temper optimism.
Transforming trade-flag context
The US-China trade war has become more severe than standard tariffs. Meanwhile, the US has already initiated probes that could lead to new tariffs on all strategic minerals, along with its ongoing probes of pharmaceutical and semiconductor imports.
According to media reports, the Chinese authorities ordered airlines to suspend Boeing aircraft deliveries following higher-than-expected first-quarter GDP growth figures. Hence, Beijing is taking a firm line in the burgeoning spat.
Hong Kong Post said it was suspending sea mail services for goods going to the US and that from April 27, mail containing goods to the US would be subject to airmail in response to a “defensive measure [against] bullying US tariffs.”
Tesla previously paused plans to export parts for its Cybercab and semi-electric trucks from China to the US This milestone exercise might have simplified the pathbreaking EV company’s plans to start mass-producing the long-awaited models as the US-China tariff crisis intensified.
Global Recession and Revisiting Go-to Investments
Wall Street stock index futures suggested another 1% loss before Wednesday open, after only modest Tuesday losses.
Gold, which has rallied 26% year thus far, even exceeded $3,300 per oz for the first time. As the Japanese yen and British pound reached six-month highs, the US dollar weakened.
It said it tempered the euro and the CANADIAN DOLLAR, as expectations are for near-term policy easing. Analysts anticipated a follow-up by the European Central Bank, predicting a further interest rate reduction as early as Thursday. Meanwhile, the Bank of Canada was due to set policy later Wednesday. Ahead of both meetings, inflation numbers came out soft, which suggested easing from the central bank.
Global stocks continued to tumble on Wednesday, with European markets battered by chip-related trade troubles. Shares of ASML, a linchpin in die production, sank more than 6% after the firm warned that the tariffs would impact its business in 2023—all except, of course, mainland China shares, which had gained.
Ahead of a busy day on Wall Street, with Fed Chairman Jerome Powell slated to speak in Chicago, March retail and industrial numbers on tap, and another round of corporate earnings releases to hit. Positive after the US banks, which updated for Q1 Tuesday, showed their trading operations benefitted from heightened market volatility in Q1.
China’s Gold Accumulation
As noted in this article, a new analysis based on data from the China gold rush highlights the factors supporting gold’s all-time highs. Beijing updates its forex reserves.
Other Key Insights
In the first three months of the year, Chinese gross domestic product grew by 5.4% from the previous year, equalling the last three months and above consensus estimates of 5.1% expansion. The numbers are likely to be a residual from Q1 activity and ahead of the bout of US tariff-induced damage seen on the economy. However, March retail & industrial prints also surprised to the upside. This eye-watering significant jump in exports last month will likely be downright lukewarm in the months ahead. A further drag on growth came from the decline in the country’s property sector, with investment in the sector down 9.9 percent year-on-year in Q1, while new home prices remained unchanged in March. Annualized GDP expectations anticipate a more gradual 4.5% slowdown for the whole year.
