US Dollar Edges Lower on Fears of a Potential Trade War

The US dollar edged lower against major peers on Friday, as investor’s confidence wavered on the proposed US tariffs on Chinese imports and China’s retaliatory actions.

The US dollar index, which monitors the greenback’s strength against six other major currencies, lost 0.4 percent to $89.08, after hitting this week’s lowest of $89.08 on Thursday.

The dollar was down by 0.1 percent to 105.08 against the Japanese yen. The pair was much being guided by risk sentiment at the moment, as investors opt for the safe-haven currency at times of a volatile market.

The greenback dropped 0.3 percent to 6.3180 against the yuan, while it slipped 0.8 percent to 1.2832 against its Canadian counterpart. The dollar also declined by 0.2 percent to 0.9472 against the Swiss franc.

Concerns over Potential Trade War Grow Further

US President Donald Trump on Thursday has signed a memorandum declaring up to $50 billion tariffs imports on China, after months-long investigation regarding China’s suspected unfair claiming of intellectual property.

The memorandum will have a 30-day consultation period, which can only begin once a list of Chinese goods is presented. This could be a good time for potential negotiations to deal with Trump’s claims on intellectual property theft and forced technology transfers.   

Under Section 301 of the 1974 US Trade Act, the White House carried out a seven month-long probe, which alleged China to be obligating US companies to share their technologies and intellectual properties, so as to allow them to do business in China.     

The President stated that they have a huge property theft problem and that the tariffs are going to make them a much stronger, much wealthier nation.

In addition to the tariffs, the Trump administration plans to implement new investment restrictions, take measure against China at the World Trade Organization (WTO). The Treasury Department will suggest additional actions as well.

Following the signing of the presidential memorandum, the Chinese commerce ministry immediately responded on Friday, saying it does not wish to be in a trade war, but it is not afraid of engaging in one.

The ministry added that they hoped the US will withdraw from the brink, make sensible decisions, and avoid pulling bilateral trade relations into a risky territory.    

China also announced its own tariffs on $3 billion worth of US imports, in response to the steel and aluminum tariffs unveiled earlier this month.

While the White House has stated that the proposed tariffs were a response to the country’s economic hostility, Trump said he considers China as a friend and that the two are in talks.  A Chinese official also said that the US and China were communicating.

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