Week in Review: Trump’s Tariffs, China’s Response and a Stalled Crypto Rally
Volatility returned to the financial markets in a big way this week, as President Trump slapped hefty import levies on Chinese products. The Trump administration says Chinese is stealing U.S. intellectual property. China says the U.S. doesn’t let it buy the products it wants.
In crypto news, digital assets touched bear market lows on Sunday before rebounding 20%. However, the crypto asset class as a whole was down over the last seven days.
China Responds to Trump’s Trade Tariffs
President Trump shook the financial markets on Thursday by imposing $60 billion in tariffs on Chinese imports. It didn’t take long for Beijing to respond. On Friday, Chinese authorities levied reciprocal tariffs on U.S. goods worth $3 billion. The tax applies to imports as diverse as pork, steel pipes and wine.
Although it has been commonly reported that Trump is attacking China’s trade interests, many observers of globalization have long criticized Beijing’s predatory trade practices. China joined the World Trade Organization (WTI) in 2001, but this hasn’t stopped Beijing from boosting its own firms while hurting others. Holding the government accountable has proven difficult given the opaque nature of the country’s political system.
Washington’s trade deficit with China surged 12% to $566 billion in 2017.
Trump’s tariffs triggered a massive slide in global equities, with the Dow Jones Industrial Average plunging more than 700 points in Thursday’s session. Stocks fell hard again on Friday, with the Dow shedding another 400 points.
Risky as it may be, Trump’s trade policy vis-à-vis China is on firm legal footing. It also aligns with his long-held campaign promise of holding China accountable for its trade policy. Similar calls have been made within the European Union (EU), but a lack of political will has stalled progress on meaningful trade reform.
Binance on the Move
The Binance digital currency exchange announced Friday it will move its headquarters from Hong Kong to Malta, where it will launch a “fiat-to-crypto exchange.” Although the timetable for relocation hasn’t been provided, the firm is close to securing an agreement with local banks that can provide deposit and withdrawal services.
“We are very confident we can announce a banking partnership there soon,” Binance CEO Zhao Changpeng said, according to Bloomberg. “Malta is very progressive when it comes to crypto and fintech.”
Negative headlines have followed Binance all week long after Nikkei Asian Review reported that Japanese regulators were prepared to suspend the exchange for operating without a license. On Friday, Japan’s Financial Services Agency (FSA) sent an official warning to Binance that it must comply with local licensing requirements to continue operating in the country.
Cryptocurrency Recovery Slams on the Breaks
Cryptocurrencies have come a long way from their record highs at the start of the year. On Sunday, the total market capitalization fell to around $275 billion, the lowest since November. The subsequent rally stalled at $356 billion before heading the other way. As of Friday, the market was back down to $329 billion.
Bitcoin has fallen over the last two days, but its share of the total market is now the highest since December. The cryptocurrency now accounts for 44.5% of the total market cap, according to data provider CoinMarketCap.
Crypto assets are struggling for momentum amid calls for greater regulatory oversight of the digital asset class. However, this hasn’t gone entirely as planned. Earlier this week, the Group of 20 summit concluded that it was still too early for a comprehensive regulatory framework, with Mark Carney of the Financial Stability Board arguing that the asset class posed no serious risk to the financial system.
The Week Ahead
The global financial markets are still absorbing the Federal Reserve’s recent decision to raise interest rates. It now appears that the Fed is on a clear trajectory to continue normalizing monetary policy even as consumer spending struggles to regain its footing.
Economic data will headline a holiday-shortened week through Mar. 30. On the crypto front, digital assets will look to get over the regulatory hump that has been hampering progress for the last three months. With bitcoin prices back below $8,500, significant downside risks remain.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.