Akash Jha
Why Commodities trading?
The commodities market holds significant global importance due to the interdependence of nations in terms of production and consumption.
Those nations that produce a greater quantity of goods themselves export them to other nations, while the inverse also applies. This fundamental necessity is the driving force behind the expansion of international trade and, consequently, the development of the commodities trading market.
What are the most important commodities in terms of trade?
- Globalization has shrunk the planet, and connections via sea routes, air routes, and other modes of transportation have resulted in brisk trade between countries on opposite sides of the globe.
- OPEC, Russia, and the United States of America, for example, account for more than half of global crude output, and oil-importing countries such as China and India rely heavily on these countries for their energy needs.
- The United States, Brazil, and Argentina generate more than 40% of global soybean output, and these countries export a huge volume of soybean to various parts of the world, resulting in a trade web.
- China and India are two of the world’s major gold users, and their reliance on yellow metal imports originates from this need. Furthermore, China is a significant user of building metals such as steel, copper, lead, zinc, and nickel.
How do these transactions take place?
Countries establish a mechanism to ensure that things travel smoothly and easily because they are interconnected. These are trade agreements in which two or more countries agree on the terms of their trading relationship. They are responsible for deciding the taxes and levies that countries impose on imports and exports. Every trade deal has an effect on global trade.
As a result, trade treaties are classified into two types: multilateral treaties and bilateral treaties.
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Multilateral Agreements
These accords establish international trade standards for numerous nations. International trade unions are influenced by multilateral trade agreements, including the North American Free Trade Agreement (NAFTA), the European Union (EU), and the World Trade Organization (WTO).
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Bilateral Agreements
These agreements set the standards for commercial exchange between the two countries.
Also read :- Tips for Online Commodity Trading
Trade between China and the United States – Influences global attitude
- The current topic of global trade is the dispute between China and the United States, which has lasted 17 months while they negotiate a trade agreement. China’s foreign trade has grown from $20 billion in the 1970s to about $475 billion in 2001, when it joined the World Trade Organization. It has grown tenfold since then, reaching $4.5 trillion in 2018. Foreign trade contributes approximately 35% of the country’s GDP.
- China maintains a $300 billion trade surplus with the United States each year. In terms of bilateral commerce, the United States purchases approximately $600 billion from China, with a record $378 billion bilateral trade deficit in 2018.
- While talks are ongoing, there is no assurance that the United States and China will reach an agreement on trade issues. At the moment, China is the target of all trade and tariff battles throughout the world. As a result, China’s commodity market participation is important for global commerce and economic progress.
