NZD/USD extends losses below 0.5700 as Sino-US trade tensions flare up
- The New Zealand Dollar extends losses beyond 0.5700 to hit five-month lows at 0.5684.
- Concerns about escalating tensions between the US and China are weighing on the China-proxy NZD.
- The Kiwi was already under pressure since the RBNZ cut its OCR rate by 50 bps last week.
The New Zealand Dollar is heading south against the USD for the sixth consecutive day on Tuesday. The pair extended losses below the 0.5700 line, weighed by the simmering trade tensions between the US and China, to hit fresh five-month lows at 0.5684.
News that China and the US rolled out new fees on cargo vessels arriving at their ports has opened a new front on the Sino-US trade rift, bringing back fears of a trade war escalation and crushing investors’ appetite for risk.
The Chinese Commerce Ministry affirmed earlier on Tuesday that Beijing “hopes to resolve concerns through dialogue,” but it also urged the US to correct its mistakes as, he said, US moves affect the global supply chain stability.
Concerns about further trade restrictions have added pressure to an already weak New Zealand Dollar. The pair has been on the back foot since the Reserve Bank of New Zealand surprised markets with a 50 bps cut in its benchmark interest rate, attempting to boost its ailing economy.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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