Forex | The American Sentinel Newsletter

Seeing it from a foreign perspective.

China’s surplus with the United States hit a record last month, data showed Friday, adding to brewing tensions between the economic superpowers as they stand on the brink of an all-out trade war that Beijing warned would have a “negative impact” globally.

The figures come after the two sides exchanged tit-for-tat tariffs on billions of dollars worth of goods and President Donald Trump threatened to up the ante with measures on a further $200 billion of Chinese imports.

Beijing said China’s surplus with the US hit an all-time high $28.97 billion last month, while exports to the country hit a record $42.62 billion.

Over the first six months of the year the surplus climbed to $133.8 billion, up 13.8 percent from last year, as total two-way trade continued to expand despite the face-off.

The imbalance is at the heart of Trump’s anger at what he describes as Beijing’s unfair trade practices that are hurting American companies and destroying jobs.

But in a statement from its commerce ministry Thursday, China blamed those problems on the USA, saying the imbalance was “overestimated” and caused by America’s own “domestic structural problems”.

China’s overall surplus continued to shrink, falling 24.5 percent on-year for the first six months, the data showed, with customs saying it has shrunk for the past eight quarters.

Last Friday, Trump rolled out 25 percent tariffs on $34 billion of Chinese goods, prompting Beijing to accuse Washington of launching the “largest trade war” in economic history and immediately match the US tariffs dollar for dollar.

“This trade dispute will definitely have an impact on China-US trade and will have a very negative impact on global trade,” said customs administration spokesman Huang Songping at a briefing Friday.

— A spiralling battle —

China’s commerce ministry has said the two sides are not discussing restarting trade negotiations, and renewed its pledge to “strike back” against Washington’s latest threat to slap $200 billion of Chinese imports with new 10 percent taxes.

The threat hammered global markets, especially as fears mount that Trump’s decision to pick fights with other key allies such as Canada and the European Union could fuel an all-out global trade war.

The spiralling battle with Beijing shows no signs of cooling down, and observers warn the impact will begin to hurt soon as China’s economy struggles with slowing growth — and just as leaders try to battle a worryingly large debt mountain.

“Looking ahead, export growth will cool in the coming months as US tariffs start to bite alongside a broader softening in global demand,” said Julian Evans-Pritchard of Capital Economics.

Beijing will back away from its war on debt and roll out policy easing measures, predicted China economist at Nomura investment bank Ting Lu, as it faces potential trade war fallout and a domestic slowdown proving to be worse than expected.

“We expect (economic) growth to slow noticeably” in the second half of the year, he said in a research note.

China’s total exports rose 11.3 percent year-on-year in June, beating a Bloomberg News forecast of 9.5 percent, while imports increased 14.1 percent, below the forecast 21.3 percent.

— Disrupting trade —

China’s June export upswing may have been caused by exporters shipping their goods early to beat the scheduled tariffs, analysts say, with the trade fight expected to further impact such data in coming months.

Beijing has instructed companies to look for imports beyond the US, and this week an official at China’s largest grain trader said it hoped to diversify away from US soybeans to those grown in South America and Eastern Europe.

The US has “no respect for rules of international law and international order,” said assistant foreign minister Zhang Jun on Friday, adding that China would step up cooperation with other developing nations like the BRICS grouping.

“This is the way for us to respond to the challenges of unilateralism and trade protectionism,” said Zhang.

Iran’s currency fell more than six percent against the US Dollar in Sunday, hitting a record low, as fears of a US withdrawal from the nuclear deal negotiated by former President Barack Obama continues to drive speculation.

The rial reached 55,200 to the dollar at the close on the open market — a drop of nearly a third in the past six months — according to the Financial Informing Network, considered the most reliable for fluctuations in the free rate.

“There is a clearly an increase of people buying dollars because they think the United States will pull out of the nuclear deal,” said the head of an exchange office in Tehran, on condition of anonymity.

The gap with the government’s official rate, which stood at 37,814 on Sunday, has continued to widen, threatening a return of high inflation which the government has battled to bring under control.

“The government can’t do anything when there is this much panic. If the US exits the agreement, the Iranian currency could collapse even further and reach 70,000 to the dollar,” said the exchange dealer.

The head of the central bank, Valiollah Seif, and Economy Minister Masoud Karbasian were summoned to parliament to discuss the issue last Monday.

Long queues have been seen outside exchange offices for weeks as uncertainty mounts over the nuclear deal which Iran reached with world powers in 2015.

President Donald Trump has threatened to walk away from the deal and reimpose sanctions by May 12 — the next deadline for confirming US involvement — unless new restrictions are placed on Iran’s nuclear and missile programmes.

The rial stood at around 40,000 to the dollar in October, when Trump said he would no longer certify Iran’s compliance with the nuclear deal, and has been falling steadily since.

Iran’s government took drastic measures in February to stem the decline, arresting unlicenced exchange dealers and freezing speculators’ accounts, but they have had little impact.

President Hassan Rouhani, who has staked his legacy on trying to revive the economy by rebuilding ties with the West, sought to play down the decline earlier this year, saying Iran was bringing in plenty of dollars through oil sales.