The US dollar is surging against some currencies and sliding against others at the end of the trading week as tariff hikes on Chinese imports went into effect. With inflation meeting market expectations, investors are focused more on another hiccup in the US-China trade war deliberation, which may linger into the summer and cause market strife.
On Friday, US tariffs on $200 billion in Chinese goods rose from 10% to 25% after trade representatives accused Beijing of reneging on several aspects of the working trade agreement framework.
The higher tariffs do not apply to Chinese products that were shipped before Friday. By sea, all shipments across the Pacific take roughly three weeks, which experts say is an adequate amount of time before importers have to pay increased charges on goods.
President Donald Trump, meanwhile, believes there is âno need to rushâ to complete a trade deal, suggesting that the tariffs have generated incredible wealth for the US. He tweeted:
The U.S. only sells China approximately 100 Billion Dollars of goods & products, a very big imbalance. With the over 100 Billion Dollars in Tariffs that we take in, we will buy agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance.
Trump is also urging manufacturers to bring their operations to the US to avoid the tariffs.
But China warned that it is âfully prepared for an escalated trade war,â adding that it is ready to retaliate with countermeasures. What those retaliatory weapons are is unclear for the moment, but it does throw a wrench into negotiations between US and Chinese trade delegations, which commenced another round of talks on Friday.
This comes after the US recorded a $50 billion trade deficit in March, up from $49.3 billion in February.
On the data front, the Bureau of Labor Statistics (BLS) reported that the April inflation rate came in at 0.3%, higher than the median estimate of 0.2%. The core inflation rate in April clocked in at 0.1%, which is in line with what the market had anticipated. On Thursday, the core producer price index (PPI) was reported to be 0.1% in April, just under the market forecast of 0.2%.
The USD/CAD currency pair plunged 0.31% to 1.3435, from an opening of 1.3479, at 15:11 GMT on Friday. The GBP/USD rose 0.18% to 1.3031, from an opening of 1.3009.
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