Financial markets are gripped by a nervy selloff as tensions between Beijing and Washington escalate, and fears of a no-deal Brexit rise
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Seema Shah, senior global investment strategist at Principal Global Investors, has warned that the US-China trade war is likely to intensify.
She is sceptical that the impact of the dispute will be limited to only Chinese firms, saying the impact on US business should not be understated.
Several U.S. technology sub-sectors have significant exposure to China via supply chains. For many large U.S. chipmakers, more than 30% of their sales are in China, and for a few that number is closer to 60%. If the U.S. government chooses to roll out this “export control” strategy to more companies, the effect on U.S. tech – and the knock-on effect on the wider market – could be devastating.
“First, when it comes to technology and defence related issues, not only is there a fair degree of consensus across Congress to be tough on China, but many large economies share America’s concerns about China’s practises. Second, U.S. demands around technology and defence will be very difficult to meet given that they are focused on containing China’s aspirations to be a global technology leader, and therefore too existential for China to concede.
“While a compromise on tariffs is still possible, investors should prepare for a longer, more hostile, technology war–with some meaningful collateral damage.”
European stock markets have slumped deeper into the red, as hopes of a trade war breakthrough fade.
Britain’s blue-chip FTSE 100 has now shed more than one hundred points, or 1.35%, in a wide-raging rout.
U.S equity futures and European bourses are again under pressure, following Asian stocks lower, as Sino-U.S trade tensions show little sign of easing.
The street is now officially worried that what started as a ‘tiff over tariffs’ is turning into a full-blown trade war. U.S Treasuries are steady while the ‘big’ dollar remains King.