Stocks slide as Trump lays into China and the EU

US PRESIDENT Donald Trump has ramped up his rhetoric against some of the country’s biggest trade partners in a series of outbursts, accusing the EU and China of manipulating their currencies, and threatening to slap tariffs on all Chinese imports.

Lashing out on Twitter, Mr Trump said “China, the European Union and others have been manipulating their currencies and interest rates lower”.

The comments caused European stocks to slide into the red yesterday, and halted the dollar’s recent rally. The eurozone-wide Euro Stoxx index closed down 0.33pc and the blue-chip FTSE 100 fell as much as 0.7pc before later recovering.

The accusation follows months of escalating trade tensions between the US, and China and the EU, which have seen tit-for-tat tariffs introduced by all sides.

Currently both China and the US have imposed tariffs of 20pc on around $34bn (£26bn) worth of each other’s goods, although Mr Trump earlier this month released a list of potential penalties on a further $200bn worth of Chinese imports, which could include smartwatch devices assembled in China such as the Apple Watch.

Meanwhile Mr Trump imposed tariffs on steel and aluminium imports from both the EU and China, prompting Brussels to respond with levies on items such as jeans and motorcycles.

However, despite the mounting attacks, Mr Trump’s administration has repeatedly refused to officially label China as a currency manipulator. During his campaign trail, Mr Trump had pledged to “direct the Secretary of the Treasury to label China a currency manipulator”, but later did a U-turn.

The comments will prove more inflammatory and surprising for the EU, which has been trying to ensure Mr Trump does not hike tariffs on European car imports, as threatened.

The president’s criticism has largely been directed at Germany in the past, and his top trade adviser, Peter Navarro, earlier this year said the country was using a “grossly undervalued” euro to exploit the US.

Speaking yesterday, Angela Merkel, the German chancellor, said she would work on the country’s “under pressure” relationship with the US, amid increasing concern over where the trade dispute will end.

IMF chief economist Maury Obstfeld said: “The risk that current trade tensions escalate further with adverse effects on confidence, asset prices and investment is the greatest near-term risk to global growth.”

Speaking in an interview on CNBC earlier in the day about his relationship with China, Mr Trump implied the US was ready to escalate a trade war, which the world’s lender of last resort has already warned could “tear apart” the world order.

Mr Trump said he was “ready to go to 500”, referring to the total amount of goods China exported to the US last year, of around $500bn.

“We are being taken advantage of and I don’t like it,” he told CNBC.

“I’m not doing this for politics, I’m doing this to do the right thing for our country. We have been ripped off by China for a long time.”

However, Mr Trump’s attack was not solely directed overseas, and he also criticised the US Federal Reserve, saying “the US is raising rates while the dollar gets stronger and stronger with each passing day – taking away our big competitive edge”.

“Tightening now hurts all that we have done. The US should be allowed to recapture what was lost due to illegal currency manipulation and bad trade deals. Debt coming due and we are raising rates – really?”

The critique on the central bank breaks with a long-held tradition for presidents to steer clear of influencing monetary policy to ensure its independence is upheld.