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June 2, 2019 No.
8099

Russian Media Outlet Gazeta.ru: US-China Trade War Will Bring Down Russian Economy

The Russian Media Outlet Gazeta.ru published an article, titled "Victim of war: China and the United States will bring down Russia". The article argued that Russian economy will suffer because of the trade war between China and the US.

Below is Gazeta.ru's article:[1]

The Trade War Between The US And China Can Reduce The Price Of Russian Resources

"The trade war between China and the United States will adversely impact Russia. The [Russian] Ministry of Finance fears that Russian energy resources will decline in price. The ruble has already begun to fall due to the intensified confrontation between Beijing and Washington. Analysts warn that, due to the fall in demand from China, exporters of coal, mineral ore, agricultural commodities and other resources will suffer.

"The trade war between the US and China can reduce the price of Russian resources - the Russian Minister of economic development Maxim Oreshkin told reporters. 'It is clear that this whole story will have a negative impact on the demand for Russian products. This also applies to raw materials, consequently such a scenario will mean a decline in prices for key resources: oil, mineral ore, coal and whatever is exported from Russia', the Minister said (quoted by TASS).

"According to the [Russian] head of the Ministry of economy, the trade confrontation between China and the United States will have a negative impact on non-raw-material exports from Russia due to the weakening of global demand.

"The slowdown in demand from China will hit a number of the larger Russian companies exporting raw materials to China, believes junior analyst of IC 'Freedom Finance' Alexandra Ovchinnikova. 'China is one of the largest consumers of raw materials — oil, coal, non-ferrous metals. Russia, in turn, has been the main supplier of oil to China for the last three years. In addition, impressive quantities of coal, nickel, copper and gold are being supplied to China,' Ovchinnikova said.

"'The weakening of Chinese demand under the pressure of the trade conflict will negatively affect the export positions of the Russian Federation, among which a significant share is accounted for agricultural products, forestry, products of other processing industries', declared the chief analyst of 'BKS Premier' Anton Pocovovich.

"At the same time, the new round of the trade war between the US and China has already hit the Russian currency. The dollar has already appreciate on average to 65 rubles…

"The further eruption of a trade war will in any case will put continued pressure on the ruble, asserts Anton Pocovovich.

Russian Exports May Suffer Against The Backdrop Of A General Recession

"Earlier it became known that China, from June the 1st, in response to the US initiatives, will introduce customs duties on US goods totaling $ 60 billion. The duty [will be imposed] on 2,493 goods, including American liquefied natural gas (LNG), which will be increased by 25%.

"This measure was a response to the increase in duties, from 10% to 25%, [levied] on Chinese goods imported into the U.S. U.S. President Donald Trump decided to raise tariffs after Beijing and Washington failed to conclude a final trade agreement last week.

"China, on May the 8th, announced that it would follow with an adequate response, whereas the US president was confident that Beijing would not retaliate.

"According to Trump, the trade tariffs imposed on China, will not harm the American economy, whereas China should prepare itself for the worst, due to the fact that international companies will withdraw their production from Chinese territory, since after the introduction of the new duties 'many companies that were hit by the new tariffs, will leave China for Vietnam and other countries in Asia'.

"In July, the US imposed a duty of 25% on the import of 818 goods from China with a total delivery value of $ 34 billion a year, China responded in kind. Then, in September, Washington imposed customs duties for the amount of 10% on goods imported from China, for a total value estimated at $ 200 billion. China responded with duties from 5 to 10% on goods worth $ 60 billion.

"After that, the US president agreed not to increase import duties on Chinese by 25%, for goods worth $200 billion, from January until a deal would be reached. However, this did not happen.

"Losses are borne by both parties and by the entire world economy. Exports of goods from the United States to China, during this period, fell by more than 30%.

"Anton Pokatovich is convinced that if the trade conflict with China will develop along the most pessimistic scenario, it will have a significant negative impact on the entire world economy,.

"The confrontation between the two major powers and, as a consequence, the deceleration of the Chinese economy, threatens to slow the growth of global demand for all major resources. And Russian exports may suffer against the backdrop of a general recession. The constant exacerbation of international sanctions against our country is also playing its share. Some analysts predict that this year the rate of exchange of the dollar will go to 70 rubles — in case that oil prices will fall or if the US again will raise the issue of imposing sanctions against Russia.

"A trade war will negatively affect the prices of a wide range of assets in the commodity markets, says the chief analyst of the Department of Analytics and Strategic marketing of Promsvyazbank, Bogdan Zvarich. Investors will revise the forecast for consumer goods downwards, and thus they will reassess raw materials assets in the direction of a price downturn.

"As for the possibility of reaching a trade agreement before June the 1st, according to experts, such a likelihood is very small. 'Most likely, the negotiation process will drag on and will be accompanied by the further introduction of tariffs by both the US and China,' Zvarich believes."

 

[1] Gazeta.ru, May 15, 2019