China Strikes Back at American Dumping Charges
China has struck back at accusations from the United States that Chinese solar-panel manufacturers are illegally dumping their products on the American market at prices below their manufacturing cost in order to capture the market.
The Chinese Ministry of Commerce announced on Friday that it was opening an investigation into what it says are unfair subsidies for renewable energy products across the United States. The Chinese argument is that subsidies for renewable energy sectors such as solar and wind power amount to an unfair trade advantage for American manufacturers.
Chinese manufacturers of renewable energy products like solar panels claim that the United States is in violation of World Trade Organization rules and that American subsidies for domestic manufacturers of renewable energy products make it difficult for the Chinese makers of similar products to compete in the American market.
This is just the latest spat between China and the United States with each side becoming increasingly irritated by the other. American calls to lower trade barriers in China have been met by Chinese calls for removing hi-tech trade restrictions for American exporters.
The biggest disagreement between the countries has been over the exchange rate of the Chinese yuan to the American dollar. A widely held opinion throughout the United States is that China's booming economy is being built at the expense of the American manufacturing sector because the artificially week yuan makes Chinese goods much cheaper than products made by American competitors.
Traders who believe that all this attention from the American and Chinese governments could be good for the solar power industry might want to consider the following trades:
- The Guggenheim Solar ETF (NYSE: TAN) could benefit if the current dispute between China and the United States causes solar panel prices to rise without hurting demand too much.
Traders who believe that China's response to American dumping accusations could help spark a trade war may consider an alternate positions:
- The Direxion Daily China Bear 3x Shares (NYSE: CZI) could move higher if tensions between the world's two biggest economies boil over. The Chinese economy would suffer badly in the event of a trade war with the United States. Although there would be negative repercussions for the American economy as well, China has more to lose because of its huge trade surplus with the United States.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.