Trade War Turmoil Concerns Investors, OECD Warns ‘Enemy of Growth’

China Stock
An investor watches a board showing stock information at a brokerage office in Beijing, China October 8, 2018.
(Photo: REUTERS/Jason Lee )

Investors in the United States might sell stocks as the trade tension with China escalates. the tension endangers the investments and growth of economies and the market.

The secretary-general of the OECD, Angel Guria, warned that we were in the middle of recovery when all these decisions about trade started and not only did it stifle the recovery, it basically has produced the slowdown and the potential for greater damage is still there.

She said during an interview with CNBC's Joumanna Bercetche at the start of the OECD's Spring Forum in Paris that everybody is betting today on a deal between China and the U.S. but the problem is that on the face of it the tensions are getting greater and, second, the problem, the spillover effect of this tension, is becoming more and more evident.

Prominent investors in the United States started purchasing Treasuries and selling their stocks because of the heightened trade tensions. Analysts believe that it could threaten the 10-year bull market for equities. Many of the investors wished to reverse their investments after betting that the United States and China will agree on a deal.

The challenges to international cooperation and the global economic outlook and other hot topics like the future of work and trade and competition in a digital age will be discussed in the forum. Participants, however, expect that the escalated global tensions between the two largest economies will dominate the forum.

In the first months of the year, hopes were high that the two nations will agree on a deal. The conflict heightened after the United States President Donald Trump announced that they will raise duties from 10 percent to 25 percent on $200 billion of goods from China.

He also announced that he will impose new tariffs on $300 billion goods from China. China retaliated by increasing tariffs to 25 percent on $60 billion products from the United States.

In the meantime, hopes are down that the negotiations will continue. The United States president called for currency war against China on his Twitter post. He called for the Federal Reserve to pump money into the system and to reduce interest rates to match China's game.

The United States also threatened the European Union with tariffs that might affect its car industry. Trump said that the European Union treated the United States worse than China.

Gurria said that uncertainty is the greatest enemy of growth and when you don't have investment because of trade uncertainties.

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