The U.S.-China trade war took a turn for the worse over the weekend as the share prices of Chinese companies listed on Wall Street exchanges tanked in out-of-hours trading. The hit to Chinese companies including the tech giants of Alibaba, Baidu and JD.com came on reports Washington officials have discussed an escalation of the ongoing trade war between the two economic superpowers that could include delisting companies from U.S. exchanges. The drastic step would be designed to limit financial investment from the U.S. into China’s economy.
Other talks, reports Bloomberg, have taken place around how to reduce the U.S. capital flows into China. Stopping investment by U.S. government pension funds into Chinese companies or emerging markets funds that include Chinese companies is, say Bloomberg, another possible course of action raised by President Trump. Talks are said to still be at a preliminary stage with no firm timelines yet discussed.
There are currently as many as 150 Chinese companies with stock listed on either the Nasdaq or NYSE exchanges. The Nasdaq saw a drop of 1.2% after the reports and the S&P 500 and Dow Jones slid by 0.5% and 0.3% respectively. In offshore markets, the yuan also fell 0.4% against the dollar.
With Chinese and U.S. officials set to restart trade negotiations in Washington during October, it could simply be a case of Trump ratcheting up the pressure beforehand in the hope of strengthening the negotiating position. The leverage available from raising tariffs has already been used up to a large extent, with increases imposed on $360 billion of Chinese goods over the past year. More are already due to come into effect in December. That will mean tariffs have been raised on almost all Chinese exports into the USA.
Trump’s negotiating tactics seem to be drastically swinging between a heavy handed approach, followed by making more reconciliatory statements offering hope. Last month he told world leaders at the United Nations summit that the USA was “absolutely committed to restoring balance to our relationship”. He then offered something of an olive branch by commenting that an agreement might be reached “sooner than you think”.
With global financial markets and international economic growth and investment already suffering from the rumbling tit-for-tat dispute, many around the world will be praying that a breakthrough does in fact eventuate. An escalation to the point of delisting Chinese companies listed on Wall Street exchanges would be a major new level in the globalisation order that has been established in recent decades falling apart.