The trade war that began in 2018 grew out of U.S. concerns over China’s economic imbalances and intellectual property theft. It has sparked retaliation from both sides, disrupting global supply chains and raising prices for consumers. It’s also slowed global growth, hurting the economies of both countries and creating uncertainty for investors.
The US economy is deeply integrated into the global economy, so when trade slows due to tariffs, overall economic growth tends to slow as well. This can reduce sales opportunities for American companies and lead to lower stock prices, particularly in cyclical sectors like technology and energy.
Trade wars can also spur investor outflows from stocks into safer assets like bonds or gold. This can depress stock prices in both developed and emerging markets, especially when it happens at a time when investors are already worried about slowing global economic growth.
The US-China trade conflict is unlikely to end soon. While Washington retains some leverage over Beijing through its technology controls, those influences are diminishing as China shifts markets for its own exports and reduces import dependencies on critical commodities. This trajectory is likely to continue despite the recent thawing of tensions between the two nations. For example, China now sees Southeast Asia as its biggest soybean market and grows more of its own rather than relying on American supplies. Similarly, the country is turning its attention to other markets in Africa and Latin America to replace reliance on oil from Venezuela and Brazil.
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