Why You Shouldn’t Worry About America’s Trade War with China

America and China’s trade war is said to result in recession — would it really?

Zain Nabih
Oct 9 · 4 min read
Photo: Courtesy of History in HD on Unsplash

The United States and China have been known so long for their on and off economic relationship — the two are constantly onto each other’s throat for as long as we can remember. Ever since Donald Trump got elected into presidency in 2016, the tension has then been growing stronger every day with Mr. Trump’s tenacious demands and China’s consistent prejudice on the Americans. President Trump has long accused China of unfair trading conduct and intellectual property theft while China, on the other hand, has accused America of imposing their economic rise. With neither wanting to compromise, the tension has now blown into a raging trade war.

The trade war has put so many shaken at this point, with speculation saying that the trade war may result in a global economic slowdown or even recession, seeing that near resolution might not be coming very soon. Many analysts have speculated that we may avoid global recession as of last year if both the US and China can enforce more disciplined policy responses including monetary easing for People’s Bank of China and the US Federal Reserve. Others have claimed it unlikely seeing how the trades continue uncertain growth on corporate investment and consumer spending. This recession would, as of now, intimidated lots of Traders and investors to halt their investment. But, is it as horrible as they said? Should you close your position immediately before the trade war went too far?

First of all, yes, things are not looking very bright right now. Both the United States and China have sent their deputy trade negotiators to put an end on their fifteen months old trade war, although neither side showing any side of backing down. Held under about a week before an increase in tariffs from 25% to 30% of Chinese goods, President Trump has declared that the tariff increase will take effect if the negotiation fruits no progress.

Several things were playing into how the trade war may de-escalate including US Democrats’ plea for impeachment and Trump’s request for China to investigate his political rival in the Democratic Party, Joe Biden, as well as his family. But then again, Peter Navarro, White House trade adviser, has stated that neither will get in the way of US negotiating position with China. Navarro also stated to National Public Radio that Trump would want a great deal with China or no deal at all. This negotiation will begin on Thursday and involve Chinese Vice Premier, Liu He, US Trade Representative, Robert Lighthizer, and US Treasury Secretary, Steven Mnuchin.

“Topics of discussion will include forced technology transfer, intellectual property rights, services, non-tariff barriers, agriculture, and enforcement,” stated White House spokeswoman, Stephanie Grisham.

But although the situation seems bottomless at this point, it doesn’t mean you have to panic and sell your assets in hope to reserve your wealth. One credible incredible source to back this up is Brad McMillan, a chief investment officer who oversees $160 billion for Commonwealth Financial Network. When seeing the market’s reaction to the inversion of the yield curve on Wednesday, he says “what we’re seeing this week is a perfectly normal reaction.” The inversion later corrected itself on Thursday, easing anticipation of impending trouble. If the curve stays that way for longer, it’ll be easier for all to conclude it as a false alarm.

“For our investors, I’m saying unless there’s a recession coming, you don’t need to do anything.”

If a recession is happening, investors may have to deal with one or two stocks that wholly collapse. But it also depends on the overall people’s behavior. When a recession is expected, most investors tend to panic and sell thus dropping the asset’s price. This attitude is a major factor that may affect your portfolio. Remember that even though recession seems like a difficult time to maintain your wealth, it is also a smart opportunity to buy or hold on to your assets. Traders with longer flight hours will tell you that it is not a wise idea to sell assets on a recession because you will most likely to lose money than gain. The key is to just wait for a chance for your portfolio to regenerate itself. It is more beneficial for the long-term.

Lastly, a recession is how you make it to be. Our best bet for you is to master how expert Traders prepare for a recession and adapt yourself to the right attitude to optimize your wealth in this trying time.

Lubna.io is Indonesia’s First Social Trading Platform. Learn more about us here!

See also: Why Is My Portfolio Down When the Market Is Up?

Lubna.io

Indonesia’s First Social Trading Platform

Zain Nabih

Written by

Writer @ Lubna.io. Undergrad student of Mass Communication.

Lubna.io

Lubna.io

Indonesia’s First Social Trading Platform

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