China Underground > China News > How will the China-US Trade Wars Impact Future China-UK Trade?

How will the China-US Trade Wars Impact Future China-UK Trade?

Last Updated on 2020/12/06

Due to tariff measures imposed by the United States, China’s export volumes fell by 9.7% year-on-year in the first four months of 2019.

With no more trade talks scheduled since the last round failed in May, and with both superpowers continually at loggerheads before the G20 summit in Japan, the China-US trade war appear set to continue over the coming months.

So, with the UK looking to strike new trade deals as part of the Brexit process, how might the trade wars influence China-UK trade?

How are the China-US Trade Wars Impacting the Markets?

Overall, investors remain worried that the global economy is weakening as a result of the trade wars, and markets are fuelled by concerns over the impact of continued geo-political tensions.

On the back of China’s criticisms of the US and their newly imposed tariffs on Mexican imports, people have been moving away from shares and into the commodity trading market; particularly assets such as gold. As a result, spot gold jumped to a two-month high on June 3rd as traders looked for ‘safe haven’ assets for their investments.

Thus far, the main beneficiaries of the China-US trade wars have been Vietnam, Taiwan, Chile, Malaysia and Argentina.

Looking at the commodities market specifically, copper ore and soybeans have been the commodities that have led much of the growth in these countries.

This is because Chinese importers have been purchasing soybeans, grains and cotton products from alternative countries.

Should the trade wars continue over the coming months, then commodity traders active in these markets could witness price fluctuations due to underlying market uncertainty over tariffs and their impact on supply and demand.

How Does the China-US Trade War Impact China-UK Trade?

Last year, Secretary of State for Foreign and Commonwealth Affairs Jeremy Hunt visited China on one of his first visits in the post.

On his trip, he discussed a post-Brexit China-UK trade deal with Chinese officials, with all concerned aiming to continue and strengthen what some officials have described as a “golden era” of China-UK relations.

As the China-US trade war rumbles on, the creation of a China-UK trade deal will lead to greater stability in the UK manufacturing and commodities markets, as uncertainty can be priced out.

However, formal discussions over a trade deal cannot begin until the UK leaves the EU on 31st October 2019 due to the UK’s ongoing status as an EU member.

Upon leaving the EU, it is hoped that by striking such a trade deal, the UK would be able to expand its trade with China.

Currently, China accounts for 3.6% of the exports and 7.0% of all UK imports, with the UK’s exports to China worth £22.3 billion in 2017.

In the long term, it is undoubted that the UK is looking to lessen its reliance on fellow European countries and strike lucrative trade deals with both the US and China.

Looking at certain markets specifically, the UK’s top exports to China are road vehicles, petroleum, medicinal and pharmaceutical products, electrical machinery and power machinery.

As a result, the formation of a trade deal between the two nations is likely to centre on these products, as China looks to stabilise supply and demand in the midst of a trade war with new trading partners, while the UK looks for greater certainty over its place in the world post-Brexit.

With Theresa May set to leave Downing Street and the role of Prime Minister in July, talks between the UK Foreign Office and Chinese officials will likely continue behind the scenes as the UK’s October deadline for leaving the EU fast approaches.

Featured images: Pexels
image Source: Pexels

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