Shares in China Rise as Trade Surplus Surprise Outweighs Trump’s Tariff Threat
The major Asia/Pacific stock indexes are trading higher on Tuesday, following Wall Street’s lead from the previous session. The price action suggests investors took President Trump’s threat of additional tariffs on China with a grain of salt. So far the activity in June has been a sharp contrast to the steep breaks in May.
At 05:43 GMT, Japan’s Nikkei 225 Index is trading 21199.24, up 64.82 or +0.31 percent. Hong Kong’s Hang Seng Index is at 27772.85, up 194.21 or +0.70 percent and South Korea’s KOSPI Index is trading 2109.41, up 9.92 or +0.47 percent.
China’s Shanghai Index is at 2905.71, up 53.58 or 1.88 percent and Australia’s S&P/ASX 200 Index is trading 6542.50, up 98.60 or 1.53 percent.
Gains appear to be generated across the board with no particular sector dominating the rest.
Trump Tries to Stir the Pot…
Shares in China remained strong despite another tariff threat from President Trump. On Monday, Trump told CNBC that China would have to make a deal with the U.S. ‘because they’re going to have to.”
Trump also defended his threats to slap tariffs on Mexico and China, which he said are putting the U.S. “at a tremendous competitive advantage.”
“The China deal is going to work out. You know why? Because of tariffs,” Trump told co-host Joe Kernen. “Right now, China is getting absolutely decimated by companies that are leaving China, going to other countries, including our own, because they don’t want to pay the tariffs.”
Trump also confirmed on Monday that additional tariffs on Chinese goods will be levied if Chinese President Xi Jinping does not attend this month’s G-20 meeting.
When asked during a telephone interview if that means the new tariffs would go into effect immediately, Trump told CNBC’s Becky Quick, “Yes, it would.”
But Chinese Investors Unfazed
Despite the threat of new tariffs and Trump’s claims of “decimated” companies, it’s unclear to what extent China is being hurt by U.S. tariffs.
On Monday, China said its overall trade surplus was $41.65 billion last month, significantly more than expected as the trade dispute between Washington and Beijing lingers. Economists were looking for an overall trade surplus of $20.5 billion in May.
China’s General Administration of Customs also said that the larger trade surplus came as the country’s dollar-denominated exports surprisingly increased last month, while imports came in worse than expected. Exports in May inched up 1.1% year-on-year, while imports fell 8.5% during the same period. Economists were looking for both imports and exports to fall 3.8% year-on-year in May.
Additionally, China’s trade surplus with the U.S. rose to $26.89 billion in May from $21.01 billion in April, Chinese customs data showed.
Is There Pressure on China to Make a Deal?
U.S. President Trump and Chinese President Xi Jinping may meet at this month’s G-20 meeting, but based on China’s trade balance report, there doesn’t appear to be any urgency to strike an immediate deal to end the trade dispute. Friendly trade negotiations could begin, but it’s starting to look like China is willing to extend the tariffs into the 2020 elections as it bets on the opportunity to negotiate with a new administration.
This article was originally posted on FX Empire
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