Rising trade tensions rock raw material prices

17/04/2018 12:00 - 48 total view

A Bank of Korea report released Sunday expressed concern over the volatility of raw material prices caused by rising trade tensions between the U.S. and China. 

The trade conflict between the two countries has been especially problematic for Korea as both are major trading partners. 

The report noted that, as the U.S. still suffers from a trade deficit and has an election coming up in November, the U.S. government will likely continue to increase trade pressure. China will likely respond in kind.

The U.S. government has been increasing pressure against China including the safeguarding actions it took in January when raising tariffs on imported washing machines and solar panels. In February it introduced higher taxation on steel and aluminum, while earlier this month it announced plans to slap tariffs on 1,333 Chinese products ranging from telecommunication and medical equipment to industrial robots. 

China has taken its own steps in countering those moves including an antidumping investigation on American sorghum in February, a $3 billion tariff on 128 imported goods including American fruits and pork and a warning of levying 25 percent tariffs on 106 items including American soybeans and automobiles. 

Recently the prices of Chinese aluminum and U.S. soybeans have been falling. In the case of aluminum, concerns of an aluminum import ban could lead to oversupply.

The price of aluminum as of April 6 has fallen 6.6 percent compared to Feb. 15’s value.

China accounts for 54 percent of global aluminum production. 

The increase in trade tensions has also soured investors’ sentiment toward investing in raw materials, pushing down the value of nickel by 6.3 percent, copper by 5.8 percent and zinc by 10 percent. 

The price of soybeans has also fallen. On April 4, when China announced its countermeasure against the U.S., soybean prices fell 2.2 percent. 

The U.S. accounts for 33 percent of the world’s soybean production. If China does go after the U.S. soybean industry it could have a major impact on exports. Soybeans account for 9 percent of U.S. goods exported to China and 57 percent of all soybean exports.

If China slaps a tariff, the U.S. could suffer a loss of between $1.7 and $3.3 billion with production falling between 8 percent and 17 percent. 

However, the report noted that the trade conflict is unlikely to get worse. 
Source: koreajoongangdaily.joins.com