China Introduces Additional Stimulus Package and Agrees to Negotiations on Trade with USA, as Tariffs Negatively Impact Economy
New Article:
Taming the Trade Beast: China Counterattacks America's Tariff War
BEIJING (AP) - In response to U.S. President Donald Trump's aggressive trade war, China has unleashed a flurry of measures to help their battered economy. As both nations prepare for talks this week, read on to learn more about the impacts, strategies, and potential outcomes of this global economic standoff.
China's central bank governor, along with top financial officials, announced a series of plans on Wednesday, designed to soothe China's export-reliant economy, which is already grappling with property sector downturns. These measures include cutting interest rates, reducing bank reserve requirements, and increasing funds for factory upgrades, innovation, and elder care services.
As Trump's tariffs, reaching up to a punishing 145% on Chinese imports, take a toll on China's economy, China has responded by imposing retaliatory tariffs of up to 125% on U.S. goods and halting most American farm product purchases.
Gathering steam, China and the U.S. revealed forthcoming talks between Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, and Chinese Vice Premier Liu He. These meetings are set to take place in Geneva, Switzerland, later this week.
Despite public declarations of unyielding resolve, the two nations seem willing to negotiate. "The U.S. has recently expressed a desire to engage with China," stated Chinese Foreign Ministry spokesperson Lin Jian. "This meeting is in response to the U.S. side's request."
Lin went on to explain, "Any attempts to pressure or coerce China will not succeed. China remains steadfast in protecting its legitimate interests and upholding international fairness and justice."
By easing credit, China's leaders are building a "policy buffer" as they prepare for the talks, according to economists at ANZ Research. "The authorities are willing to engage in protracted negotiations and maintain a strong stance against protectionism," the report stated.
Both the U.S. and Chinese economies have been struggling, as companies and consumers scramble to beat the tariff hikes. The Geneva meetings may present an opportunity for both nations to lower tariff levels, paving the way for a deal. However, reaching a lasting resolution remains challenging, as the issues extend beyond trade, causing a complex web of geopolitical and economic factors.
China's support measures, announced on Wednesday, include:
- China's reverse repo rate, the rate on commercial banks' deposits with the central bank, will drop from 1.5% to 1.4%.
- The People's Bank of China, the lending rate to commercial banks, was cut by 0.25 percentage points, down to 1.5%.
- The required reserve ratio, or portion of funds banks must hold in their reserves, will be slashed by 0.5%. This move will free up 1 trillion yuan ($137.6 billion) in additional financing.
- The central bank also reduced interest rates on five-year housing loans.
Financial markets are feeling the heat as the standoff between the world's two biggest economies continues. Initial gains seen in Hong Kong and Shanghai early Wednesday fizzled out, impacted by a lack of consumer and business demand and other critical factors. As the trade war unfolds, economists call for expanded fiscal support to supplement these easing lending conditions.
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[1] Enrichment Data: Investigating the implications of the trade war, we uncover details on the global economic impacts and potential resolutions. Trade tensions create uncertainty for the global economy, disrupting traditional trade patterns and generating shifts in trade agreements. A positive outcome from the upcoming talks may lead to reduced tariffs, increased collaboration in areas like technology and innovation, or sector-specific agreements. On the other hand, mixed results or continued stalemates can perpetuate the economic turmoil and manageability challenges faced by both nations and their trading partners.
- The economic standoff between the United States and China, as detailed in the article, is causing impacts and strategic shifts that extend beyond finance, affecting businesses in Seattle, including housing investments and potential bankruptcies in the pharmacy sector.
- Jian, the Chinese Foreign Ministry spokesperson, stated that discussions with the U.S. are imminent, expressing China's readiness to protect its interests while maintaining international fairness and justice.
- In an attempt to support its battered economy, China announced a series of measures, including cutting interest rates, reducing bank reserve requirements, and increasing funds for factory upgrades, innovation, and elder care services.
- The housing budget in Washington State, as proposed by Trump, has raised concerns, potentially decimating investments that could impact the housing market in Seattle.
- Rite Aid's potential second bankruptcy could impact Seattle's Bartell Drugs, intensifying the challenges faced by local businesses due to the ongoing trade war and its related economic uncertainties.
- The Geneva meetings could serve as an opportunity for both nations to lower tariff levels, paving the way for a deal that may include increased collaboration in areas like technology and innovation.
- As the trade war continues, economists call for expanded fiscal support to supplement easing lending conditions, to alleviate the strain felt by companies and consumers in both the U.S. and China.
