Trade War Monitor, Aug. 18: Sluggish Economic Indicators as Trade Talks Drag

The ongoing U.S.-China trade conflict continues to have a notable impact on China's economy and global markets, despite a 90-day extension of the tariff truce. This tension is especially evident in the export of home appliances, with China's exports in this sector dropping 2.2% year-on-year in the second quarter, a significant shift from the 13.6% growth realized in the first quarter. This marks an end to a sustained expansion since August 2023, highlighting the direct effect of escalating U.S. tariffs on Chinese exports and their role in disrupting global supply chains and weakening international demand [para. 1][para. 19][para. 20][para. 21].

China's broader economic indicators reveal additional challenges. Industrial output growth in July slowed to 5.7% year-on-year—the lowest rate this year and down 1.1 percentage points from June. This slowdown results from the manufacturing off-season and production restrictions aimed at curbing excessive competition (“involution”). Retail sales growth also decelerated as government subsidies for auto purchases tapered off, though service consumption was buoyed by increased summer travel. Fixed-asset investment growth for the period January to July slowed to 1.6%, with declines across manufacturing, infrastructure, and real estate [para. 2][para. 5][para. 6].

Amid these economic headwinds, geopolitical tensions continue to shape major business decisions. CK Hutchison Holdings Ltd. has expressed openness to allowing a Chinese mainland strategic investor to join a consortium bidding for its global port assets—a move driven partly by the need to navigate complex regulatory hurdles linked to U.S.-China rivalries. The deal, which covers 43 port facilities in 23 countries, including two at the Panama Canal, remains in negotiation, with state-owned China Cosco Shipping Corp. Ltd. identified as a probable new participant. However, the transaction is not expected to conclude before 2025 [para. 3][para. 9][para. 10][para. 11][para. 12].

The technology sector is also affected. The U.S. government, under President Donald Trump, has signaled conditional approval for Nvidia Corp. to sell advanced AI chips to China, provided their performance is curtailed by 30% to 50%. Additionally, Nvidia agreed to share 15% of China-related H20 chip revenue with the U.S. government. This reflects an attempt by the Trump administration to secure economic benefits in exchange for trade concessions, while maintaining restrictions on China’s access to cutting-edge technology [para. 7][para. 8][para. 9].

Further illustrating trade friction, a preliminary ruling by the U.S. International Trade Commission has found that China’s BOE Technology Group misappropriated trade secrets from Samsung Display. If confirmed, this could result in a ban on BOE’s relevant high-end OLED screens entering the U.S. market [para. 25][para. 26][para. 27].

Meanwhile, economic reprisals extend to the EU, with China’s Ministry of Commerce sanctioning two Lithuanian banks following the EU's addition of Chinese financial institutions to sanctions lists over Russia. These sanctions bar Chinese entities from engaging with the designated Lithuanian banks [para. 13][para. 14][para. 15][para. 16].

Despite economic uncertainties, gold prices have surged, breaking multiple records and bringing substantial profits to mining companies worldwide. Newmont Corp. saw its first-half net profit rise by 286% to $3.95 billion, while China’s Zijin Mining forecasts a 54% increase in net profit, underscoring gold’s renewed status as a haven asset during global uncertainty [para. 28][para. 29][para. 30].

In summary, the intricate web of U.S.-China economic competition demonstrates pervasive effects—spanning trade, technology, investment, banking, and commodities—highlighting both immediate disruptions and ongoing policy maneuvering [para. 1][para. 2][para. 3][para. 4][para. 5][para. 12][para. 13][para. 14][para. 19][para. 21][para. 25][para. 28].