China’s counterpunch to Trump’s tariffs sparks global market selloff

Tit-for-tat tariff threats from the US and China ignited fears that a trade war was beginning between the world’s two largest economies, sending US stock futures tumbling and sinking European and Asian equities.

China on Wednesday, matching the scale of proposed US tariffs announced the previous day, said it would levy an additional 25% levy on around $50 billion of US imports including soybeans, automobiles, chemicals and aircraft.

The step escalates the risk of a trade war between the world’s two largest trading nations, with the Trump administration’s latest offensive based on alleged infringements of intellectual property in China. While the dispute centres around a $375 billion goods trade imbalance in favour of China, the US is also now targeting high-tech sectors that Beijing sees as the future for its economy, prompting an angry reaction. “China’s response was tougher than what the market was expecting — investors didn’t foresee the country levying additional tariffs on sensitive and important products such as soybeans and airplanes,” said Gao Qi, Singapore-based strategist at Scotiabank. “Investors believe a trade war will hurt both countries and their economies eventually.”

Futures on the Dow Jones Industrial Average fell nearly 2.5% at 11.56 in London with early trading on the S&P 500 sinking almost 2%. The MSCI Asia Pacific Index dropped 0.6% to the lowest in almost eight weeks.

Beijing’s proposed targets strike at the core of commercial relations between the two countries, and at some of the most politically sensitive goods in core Trump constituencies. For example, China is the world’s largest soybean importer and biggest buyer of US soybeans in trade worth about $14 billion last year.

Industries including aerospace, information and communications technology, robotics and machinery were among those targeted by the US Trade Representative on Tuesday. The agency said it chose products to minimize the impact on the US economy and consumers.

BEIJING: