Financial Update – 19 May 2019
China said it would increase existing tariffs on $60 billion of American goods in retaliation to Donald Trump’s decision to raise duties on $200 billion worth of Chinese exports. The President threatened tariffs on a further $300 billion of Chinese goods if there was no progress in trade negotiations over the next month. Trump’s assertion that US consumers would not be hurt by the escalation in tension with China was undermined by his economic advisor who said that they would have to foot some of the bill.
The transfer of technology is another contentious issue between the two countries. During the week, President Trump and the Commerce Department signed orders blocking Huawei, a Chinese technology giant, from involvement with American mobile networks and suppliers.
In economic news:
- retail sales in China grew by their slowest rate (7.2%) in 16 years.
- Car sales dropped 14.6% in April from a year ago and are down 12% year to date.
- Sales of energy-efficient vehicles rose 18% in April and are up 60% for the year.
- Industrial production expanded by 5.4%, the slowest rate in a decade.
- In the US, retail sales fell 0.2%, signalling a weak start to second quarter consumer spending. Industrial production was also subdued, posting a decline of 0.5%.
- In the UK, the unemployment rate fell to 3.8%, its lowest level since 1974.
- Separately, the pound dived to a four-month low against the US dollar after cross-party Brexit talks between the government and the Labour party collapsed.
- Oil prices posted a weekly gain due to concerns over rising tension in the Middle East.
- Iran’s foreign ministry rejected accusations from Saudi Arabia that Tehran facilitated an attack on four oil tankers off the coast of the United Arab Emirates last Sunday.