Technically Speaking For May 13
- China sharply escalated trade tensions today.
- Oil prices remain contained.
- The markets sold-off sharply today, setting a bearish tone for the week.
China announced it will retaliate against the U.S.’s tariff increase (emphasis added):
But China showed it planned to counter his adversarial approach with its own penalties against U.S. companies. The Chinese government said it would impose tariffs on U.S. imports starting on June 1, with the steepest penalties hitting textile products, certain kinds of beef and coffee, and technology like microwave ovens, printers and solar batteries. The tariffs would range from 5 percent to 25 percent.
China is now one of the world’s largest economies; it has also been increasingly flexing its diplomatic and military muscle over the last 5-10 years – which means this move shouldn’t surprise anyone. While the tariff’s impact on the U.S. economy will be low, they do increase the overall level of risk. As explained by one economist:
…but he points to “spillover effects,” including newly turbulent financial markets that could in turn rattle business confidence, slowing new investment. “The economy’s fundamentals overall are solid, and the odds of a recession are low. The risk is we talk ourselves into one.”
Oil Price update: This morning, the Financial Times reported that two Saudi oil tankers were damaged near the UAE – which reported similar damage to their tankers over the last few days. This is occurring against the backdrop of escalating U.S.-Iran tensions. These started when the U.S. declared the Iranian Revolutionary Guard was a terrorist organization; rumors that Iran was planning to target U.S. interests in the Middle East followed. Despite this news, oil prices are contained: