The trade war US President Trump started and is now escalating, has turned into much more than trade. Some analysts point out that this is a technology war on top of that while others draw comparisons to a new cold war between two superpowers. Trump has made every effort to escalate the trade war, especially when news reports after bilateral meetings sounded a more optimistic. The reason may be that took on the mantle of a war time president as the election cycle is coming closer to a full start. Along the way, his advisors and Trump have severely miscalculated the Chinese response.

The latest intensification of the trade war was Trump’s move to slap $300 billion worth of Chinese imports, which were previously tariff free, with a 10% tariff starting September 1st 2019. Prior to his tweet, global financial markets were already in a risk-off mode which only accelerated. China instructed its companies to get out of the US agricultural market for the time being. This was a precision strike against the Trump base as he depends on their support. China is the US 4th largest agricultural market behind Canada, Mexico and Japan. The Trump administration has readied a $16 billion aid package to farmers as it tries to open up new markets for them.

This brings the Chinese Yuan into play as the People’s Bank of China allowed the exchange rate rise above 7.00 against the US Dollar. This was the first time since the global financial crisis of 2008 that the Chinese Yuan traded north of the coveted 7.00 mark. Forex traders are now focused on the PBOC’s Daily Yuan Reference Rate which currently stands at 7.0039 to the US Dollar. The Chinese Yuan is allowed to trade within a 2% range of this reference rate. It makes Chinese exports cheaper to trading partners and therefore softens any negative impact from US tariffs. Trump has now labeled China a currency manipulator and wants to engage into a currency war.

Since the Chinese Yuan is not as readily available to most forex traders, the Australian Dollar became the top proxy trade. Will the Australian currency get a boost as China is gaining the upper hand on Trump’s trade war? Follow the PaxForex Daily Fundamental Analysis now and grow your balance trade-by-trade!

Despite the trade war with the US, China reported a surprise increase in exports for the month of July. Export rose by 3.3% annualized as imports plunged by 5.6% annualized, leaving China with a July trade surplus of $45.06 billion and June’s trade surplus was revised higher to $50.98 billion. It appears that China is doing a lot better than the Trump administration has predicted and with a growing trade surplus, China has the time and money which Trump lacks. Two famous quotes by General Sun Tzu sum up the current situation; “To a surrounded enemy, you must leave a way of escape.” and “There is no instance of a nation benefiting from prolonged warfare.” While China is maneuvering according to those principles, Trump appears to ignore them and follow his own advice. The Chinese Yuan Reference Rate will continue to dominate trading screens and here are three forex trades which will dominate your profits!