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A report in the Global Times has altered the market’s attention to what they say as being  wrong to view China’s tariff reductions starting from 2020 as result of US trade war, arguing instead that it is part of China’s state goals and robust efforts to open up the massive domestic market.  

Key notes

  • While China’s decision on Monday to reduce tariffs on more than 850 foreign products may attract special attention given the ongoing trade negotiations between China and the US, it is wrong to view the move, which could benefit many countries around the world, only through the lens of the trade war.
  • The announcement itself and the types of products covered made it clear that this is a part of China’s state goals and robust efforts in recent years to open up the massive domestic market to more high-quality foreign products from around the world based on its own market demand and at its own pace.  
  • China did not lower tariffs on these products because of the US-initiated trade war. And though products from the US will see lower duties, the move will benefit all countries that export products to China.
  • In summary, this move on Monday further illustrates China’s long-stated position that it will continue to open its doors to the world but at a pace set by itself based on domestic market conditions. A trade war would not alter that path.

FX implications

AUD/USD has been unfazed by the report and is embarking on a test into the key resistance area, that if broken, will confirm an upside bias and higher conviction long entry point in an extension of the bulls channel towards 0.70 the figure and 8th March lows. 0.7050 and 0.7080 would come as the next key target areas.