Markets unfazed by trade-war shot

Markets across Asia, including New Zealand, largely shrugged off the latest shot in the US, China trade war.

Yesterday the Trump administration said it would impose tariffs on US$200 billion more in Chinese goods, from next week, escalating a trade war between the world’s two biggest economies.

But while US markets fell early yesterday, investors across Asia and the Pacific seem to have been prepared and the reaction was relatively calm. The local NZX 50 closed up 0.5 per cent at 9316.

Japan’s Nikkei index and Korea’s Kospi index were also trading higher.

China’s Shanghai Composite Index was flat.

Markets in Australia and Hong Kong were down but by less than one per cent.

The tariffs will start at 10 per cent and rise to 25 per cent starting January 1 2019.

China has said it’s ready to impose retaliatory tariffs. The US had already imposed tariffs on $50b in Chinese imports.

While a tariff escalation did pose risks to corporate profits, the trade stoush appeared to playing out in a predictable pattern, said JBWere investment strategist Bernard Doyle.

“Whatever you say about Trump he has followed a playbook through these trade disputes,” he said.

In the past few months he seemed to have made progress in settling with Mexico and Canada over NAFTA and settling with Europe, he said. His focus was now very much on China.

“So the trade risk does seem to following a rational path,” he said. “Obviously markets would love to see some sort of truce with China.”

While the first round of US tariffs hit mainly industrial goods, the latest round is more consumer targeted, said Michael McCarthy chief market strategist at CMC Markets.

“In any normal circumstances an inflationary move that puts a brake on growth would be an unambiguous negative. Given many economies face inflation that is too low there could be a more nuanced impact on investor thinking,” he said.