China's side of things on the trade war it has with the US isn't doing well, but it appears that the US has more to lose than it has to gain. CNBC reported that Alicia Levine, chief strategist at BNY Mellon, says that Wall Street shouldn't be so confident about winning the war.
She added that "accurately pricing" things is a must to negate the effects of the fallout coming from this costly war.
She continued to say that the market received a "May 5 wake-up call." Instead of acting on it, it sorted it out by not sorting it out. The president, meanwhile, acted on it by issuing another one of his infamous tweets, threatening new tariffs imposed on top of already existing ones. The stock market reacted with the S&P 500 going down 4% and the Dow falling by 3.5%.
Levine said that, based on her observations, the market is turning into a "tech war." The Nasdaq, a stock that's heavy on tech, went down by as much as 6%. She is one of those who expected the markets to react more negatively before it rights itself. She warned, however, that the tit-for-tat war between the US and China could go longer, meaning that the decline could happen longer as well.
A viable solution that traders and investors are seeing during the China-US trade war is to move into other territories; something that the US would see as a win for them. BBC News pointed out that some companies in China are considering moving into other countries in Asia in order to avoid the stiff penalties that Trump's tariffs impose.
One viable option is to move into Vietnam, China's business-friendly neighbor to the South. Moving into the country has almost the same conditions as when doing business in China; factories and manufacturers will have access to cheap labor and the business environment is just as attractive.
In fact, some companies have already moved into Vietnam before the first wave of tariffs hit.
In the first quarter of 2019 alone, though, Chinese investments into Vietnam had already reached 65%, more than the total for the same time in 2018. It only goes to show that China is also seeing the benefits of avoiding the punitive tariffs by dealing with Vietnam, so the US may not be entirely successful in their tariff policies, after all.
Levine has more bad news for the US government. Utilities and real estate may suffer the consequences of the trade way next. If the US economy does not diversify, it may really end up being the loser in the trade war.