China-US tensions spooking markets

TUESDAY, AUGUST 27, 2019 themercury.com.au SUBSCRIPTIONS 1300 696 397 ALMOST $25 billion has been cut from the value of Australia’s biggest companies as another wave of fear washes over the share market.

The bourse was again a sea of red yesterday as the trade war between the US and China intensified at the weekend.

Late on Friday, China announced it would levy new import taxes on $US75 billion worth of goods shipped in from the US each year.

US President Donald Trump retaliated, announcing a hike in planned tariffs on $US300 billion worth of Chinese goods, from 10 per cent to 15 per cent. Officials in the US also declared existing tariffs on another $US250 billion in Chinese goods would rise from 25 per cent to 30 per cent on October 1.

Wall Street had buckled on Friday as China and the US exchanged blows, and the Dow Jones Industrial Average surrendered 2.4 per cent.

The benchmark ASX 200 index, which tracks the 200 biggest companies listed in Australia, followed yesterday, falling sharply on the opening bell. At its nadir, in late trade, it was down 1.7 per cent.

It recovered some ground to end the session 1.3 per cent lower, at 6440.1 points, with $24.6 billion stripped from the value of companies in the index.

Responding to China’s tariff announcements on Friday, Mr Trump declared on Twitter it was “a GREAT opportunity for the United States”.

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing … your companies HOME and making your products in the USA,” he said.

St George Bank senior economist Besa Deda said in a research report for investors that the trade stoush had taken “another turn for the worse”.

“When the US President demands that US companies ‘immediately start looking for an alternative to China’, you know that trade relations are getting increasingly frosty.”

Ms Deda noted trade developments and political risk were “front and centre of discussions” during the conference of central bankers at Jackson Hole, in the US state of Wyoming, at the weekend.

Speaking at the event on Sunday, Reserve Bank governor Philip Lowe said the world economy was “experiencing a series of significant political shocks”, including the “serious issues” between the US and China and Brexit. Those shocks were “generating considerable uncertainty”, he said.