US-China trade tension hits hard on global economy
China on Monday, December 2, hit back at the United States for signing a bill supporting pro-democracy protests in Hong Kong.
The Chinese retaliation will limit U.S. Navy and critical nonprofit organisations in Hong Kong.
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China said that in response to the “unreasonable behaviour” of the U.S., it would impose sanctions on several U.S.-based nongovernmental organisations and revoke port privileges for American warships visiting Hong Kong.
Some of the NGOs that are targeted include the National Endowment for Democracy, Human Rights Watch and Freedom House for supporting the anti-government protests that have gripped Hong Kong in the last six months.
Trump’s approval of legislation on Hong Kong has now “stalled” trade negotiations with China, sparking fears of escalating tension between the two super powers in their trade talks.
Chinese officials have indicated that for a deal to be signed, however, the U.S. must also remove existing tariffs—and not just halt those planned to take effect on December 15.
Derailing progress
But gradually, Hong Kong is emerging as a major point of contention that could derail progress on negotiations between the U.S. and China in the 17-month-long trade war that has slowed global economic growth.
This diplomatic rift is affecting global economic growth, which is dominated by the US-China trade strain, unresolved Brexit negotiations and geopolitical tensions which impacted crude oil prices.
These developments heightened policy uncertainties, weighed down on business confidence, dampened investment spending and industrial production, and have resulted in a synchronised growth slowdown across major advanced economies.
Growth in emerging markets and developing economies, including Ghana, has also weakened slightly, reflecting the decline in global trade mainly due to the trade tensions.
International commodities markets data show that crude oil prices fell 3.8 per cent on a year-to-date basis to close at an average of $59.8 per barrel for October 2019.
Again, the decline was on account of investor concerns about the unrelenting US-China trade tensions and continued build-up in US crude inventories.
Gold prices slipped
Gold prices also slipped marginally to $1,490.9 per fine ounce after trading above the $1,500 per ounce for two successive months on the back of dovish monetary policy stance by major central banks, including the Bank of Ghana, which has continously maintained that the tension is having an effect on its monetary policy analysis.
On a year to date basis, gold prices gained 18.9 per cent. The average price of cocoa increased by 11.2 per cent to settle at $2,475 per tonne in October 2019. This was mainly supported by increased third quarter grinding data which serves as proxy for demand.
After the symbolic retaliation on Monday, tensions have escalated yet again and even President Trump has acknowledged that Hong Kong is a “complicating factor” in the ongoing trade negotiations.
These latest developments could also spell trouble for the stock market, which has recently been hitting new record highs amid stronger-than-forecast economic data and rising trade optimism over the last few weeks, though that could now dissipate.