Non-Energy Commodity Trading Exposure Makes China Weaker In US-China Trade War

China’s sensitivity to non-energy commodity trading has made it weaker in the ongoing trade war between the US and China.

Diana R. Rudean, Director of Applied Research at Axioma, said the tariff fight trapped China to get more sensitive to changes in the broad non-energy commodity prices. Rudean also stated that the latest downturn in the non-energy commodities has impacted much heavily on the Chinese market.

The Chinese markets’ exposure to non-energy commodities have resulted in the market trend with the Chinese shares on a downturn and the US markets on a tear, and it seems that the US stocks are withstanding the intensifying trade war much better than the China stocks, based on the study published by Axioma in August 2018.

The diminishing sensitivity of the US markets towards non-energy commodities might be due to tax cuts and deregulation. The protectionist policies like tariffs boosting investor sentiment in the US market could also be one of the reasons.

Moreover, the U.S. market might have progressed towards stocks that are less sensitive to the commodity market, added Rudean.

The non-energy commodity trading prices started decreasing after the trade war between the US and China intensified in June 2018. The GSCI Non-Energy Index has fallen 4.5 percent until now this year.

The Chinese indexes have recorded sharp losses and its market volatility is increasing until now this year, while the U.S. stocks are going up and the American market volatility is down, according to a report available on CNBC.

The escalating trade war between the US and China has thus impacted much heavily on the Chinese market, with a more diffident influence on the US market. The differences in the impact on the market are due to the difference in the sensitivities of these two countries towards non-energy commodity trading, as reported on Harvest.

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