OK, they say make nice with China and eliminate trade tariffs, but won’t that hurt the little bloke here on the mainland? Well let’s see what is going on here. The international Monetary Fund has estimated that for every one-percent point cut in investment in China, Global growth declines by just under a tenth of a point. The Chinese supply chain hits close to home as the Australian Bureau of Statistics reported that the change in the number of new loans granted for owner-occupied homes in November dropped from 2.1% to 0.9%. There’s a bit of an indication for you, should you wonder if the little bloke is suffering. Though, it would appear that the affect is more circumstantially an effect of slowing growth, due to reduced demand, rather than from trade tariffs. Now don’t go off on me working blokes. It’s a double-edged sword. What’s worse, slow growth or slower growth? The supply chain doesn’t start and stop with China. Other drivers from the UK, Brazil, EU, and US are pushing and pulling on the chain. The RBA left interest rates unchanged on Nov. 5th after an expected cut of 25 basis points. Let’s see where they take us and the cash rate on Dec. 3rd, as near term reports from the National Australian Bank shows their business confidence data, along with data from the Melbourne Institutes inflation expectations. The Aussie dollar has continued to be range bound. Chinese data on new loans were softer in October, down 14% from last year, in spite of the governments push for more lending. That seems to demonstrate that they have been feeling the pressure from being labeled currency manipulators.
In my opinion and as history proves, trade tariffs are the first shot fired, across the ocean, in an all out currency war, where there are no winners.