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How Will The US-China Trade Talks Impact US Dollar?

Samson Ononeme | May. 30, 2018
How Will The US-China Trade Talks Impact US Dollar?

US President Donald Trump announced his intention to impose tariffs on $50 billion of Chinese imported goods re-escalating his trade spat with China. How will the US Dollar be impacted? Analysts at ADS Securities share their outlook as the US-China trade talks seems to be affecting more than just the greenback’s rally.

30 May, ADS Securities – Negotiations between Washington and Beijing on a trade settlement seem to be affecting more than just Dollar’s rally and a positive outcome will definitely be in the interest of the US economy.

How Will The US-China Trade Talks Impact The US Dollar?

If however negotiations flop, the US administration will be forced to return to its “weaker Dollar” policy in order to compensate for its huge trade deficit with China, which has exceeded $500 billion. Promises are being made from China to increase its imports from the US from $180 billion to $380 billion.

The extra $200 billion in difference could contribute to reduce the trade deficit from its current levels of $500 billion to $250-300 billion, which would be a major development for the US economy.

On the other hand, another major issue is Oil prices that have reached close to the pivotal level of $80, jumping from $26 in 2015 to its current high levels, at a time when its outlook is under debate.

Factors Driving Oil Prices Up

According to ADSS’ analysis, the price of Oil will rise to $80 due to several factors: starting with the fact that there is no other alternative to it specifically in the next fifteen years and secondly, that it’s a basic raw material making 95% of the economic activity. The US economy has been showing an upward trend for a few years now, as does the Chinese economy.

Both economies have also exceeded expectations in terms of recent figures, all of which led to higher demand for Oil, especially with the huge improvements in the US labor market.

As such, Oil has been witnessing unprecedented demand as a result of higher expectations and the pace of consumption in the United States, which is expected to record the highest rate in the history of the US economy.

ADS Securities Risk Disclaimer

This article was provided by analysts of ADS Securities.

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