Markets rocked as Trump hits out
Global sell-off as President blasts Beijing
GLOBAL stock markets were left reeling as the trade war between the US and China escalated yet again.
the dispute between the world’s largest economies flared up as China responded to Donald trump’s decision to hit its goods with extra tariffs, sending the FTSE 100 down 2.5pc on fears this will hit global growth.
In what was seen as a counterattack after trump’s actions, Beijing allowed its tightly- controlled currency, the yuan, to slip to an 11-year low against the dollar.
the move made its exports cheaper for US buyers and American goods more expensive for Chinese buyers.
It triggered a sell- off of shares around the globe, as traders grew fearful that a full-blown currency war was about to erupt.
In an angry outburst, trump accused China of ‘currency manipulation’ and branded its decision a ‘major violation’.
the US President has long claimed Beijing unfairly suppresses the value of the yuan to boost its own exporters.
trump tweeted: ‘China dropped the price of their currency to an almost historic low. It’s called “currency manipulation”.’
the fiery row spooked markets, causing traders to turn to safe havens such as gold and government debt.
Amid the turmoil, £46bn was wiped off the value of the UK’s top companies in a blow to millions of pensioners who have their nest eggs tied up in stocks.
Across the Atlantic, the Dow Jones Industrial Average plunged by more than 900 points as the panic spread to wall Street in the worst day for US stocks this year. It eventually closed down 2.9pc, or 767.27 points, at 25,717.24.
the pan-European Euronext 100, Germany’s Dax, France’s Cac 40 and Italy’s FtSE MIB index also racked up losses.
Peter Boockvar, chief investment officer at new Jersey-based Bleakley Advisory Group, said: ‘now we have a trade situation that is going off the rails and we are only further apart from any resolution with the Chinese. the policy of using tariffs as a tool to address our legitimate beefs with the Chinese has failed.’
trump’s decision to slap new tariffs on around £250bn of Chinese goods last week provoked fury in Beijing. the move appeared to catch China’s government offguard, coming less than two days after the white House had described the latest round of talks to find a resolution as constructive.
But analysts said Beijing, which on Friday said it was not afraid of a trade confrontation with the US, had now decided to hit back. Unlike many other countries, China has a target price for the yuan, also known as the renminbi, and steps in when it strays too far from this.
Since 2008, it has not passed the floor of $1 per 7 renminbi - but yesterday the currency was allowed to break the symbolic threshold.
Julian Evans-Pritchard, a senior China economist at Capital Economics, said: ‘the People’s Bank of China has effectively weaponized the exchange rate.’