The United States and China are planning to impose new port fees on each other’s shipping companies. This will affect a wide range of goods, from toys to crude oil. The US will start charging these fees on October 14, while China has already introduced its fees for US-linked vessels, but Chinese-built ships are exempt. China’s Commerce Ministry announced measures against five subsidiaries of South Korea’s Hanwha Ocean, claiming they supported US investigations. These developments have led to the AUD/USD pair dropping 0.53%, currently at 0.6480.

Understanding Trade Wars

A trade war happens when countries have economic conflicts, often due to protectionist measures like tariffs, which raise import costs. The US-China trade war began in 2018 over issues such as trade practices and intellectual property, leading to rounds of tariffs until a deal was reached in 2020. The return of Donald Trump as US president has intensified tensions, with plans for 60% tariffs on China. This renewal of trade conflicts disrupts the global economy, affecting supply chains and increasing inflation, which in turn impacts consumer spending and investment. The new port fees mark a fresh and unstable chapter in the trade dispute. Volatility is rising, as seen in the VIX volatility index, which climbed over 8% this past week, surpassing 21 points. Traders might consider buying options to protect themselves or speculate on market swings in the weeks ahead. The Australian dollar is under pressure, falling below 0.6500 due to concerns about China’s economy. We are also seeing strain on the offshore yuan (CNH), close to the 7.35 mark against the dollar. Looking back at 2019, similar tensions caused the yuan to weaken. An escalation now could make long US dollar positions more appealing.

Impact on Shipping and Commodities

The new port fees will hit the shipping industry hard, which has already contributed to rising inflation. Global container freight rates, which had dropped nearly 90% from their pandemic highs, have surged 15% in the last month in response to these fees. Companies like Maersk and COSCO may experience squeezed profit margins, making put options on shipping and logistics ETFs a smart choice. Concerns about slowing industrial activity in China are also impacting commodities. WTI crude oil prices have dipped below $80 a barrel, and copper prices have fallen 4% this month alone. Since China is the largest consumer of raw materials globally, selling futures or buying puts on industrial metals might be a wise strategy. US companies that heavily rely on manufacturing or sales in China are particularly at risk. We are keeping an eye on firms like Apple, which earns nearly 20% of its revenue from China, as well as chipmakers depending on the region’s supply chains. These stocks could face significant declines, making them suitable for protective put strategies or short positions. Create your live VT Markets account and start trading now.

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