Global stocks tumble on trade war fears

TOKYO (Reuters) – The rumblings of a global trade war shook stock and currency markets on Friday after US President Donald Trump announced long-promised tariffs on Chinese goods and Beijing pledged to fight any such war to the end.

Spreadbetters expected European stocks to open lower, with Britain’s FTSE losing 0.9 percent, Germany’s DAX falling 1.6 percent and France’s CAC shedding 1.5 percent.

S&P futures were down 0.6 percent, suggesting a weaker open on Wall Street later in the day.

Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China, although they have a 30-day consultation period, raising the chance that final measures could be watered down.

Investors fear the US measures could escalate into a trade war, with potentially dire consequences for the global economy.

Beijing urged the United States on Friday to “pull back from the brink”.

“China doesn’t hope to be in a trade war, but is not afraid of engaging in one,” the Chinese commerce ministry said in a statement.

China unveiled its own plans on Friday to impose tariffs on up to $3 billion of US imports in retaliation against US tariffs on Chinese steel and aluminum products.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.5 percent as stocks across the region dropped. For the week, the index recoiled over four percent.

Shanghai shares were down 3.8 percent. “The economic impact on both China and the US will be determined by what form the tariffs end up taking. The effects are likely to be felt more strongly in the US and will increase both consumer and producer prices,” said Hannah Anderson, global market strategist at J.P. Morgan Asset Management.

“The equity market will bear the brunt of the market reaction. Most impacted will be the US, Korea, and Taiwan as companies domiciled in these markets make up a significant portion of the global production chain of Chinese exports.”

Japan’s Nikkei dropped 4.5 percent.

Australian stocks lost 1.9 percent, Hong Kong’s Hang Seng was down 3.1 percent, Taiwan shares slid 1.6 percent and South Korea’s KOSPI retreated almost three percent.

“A possible trade war between the United States and China is especially serious for the South Korean economy as it could directly or indirectly affect the country’s trade with them as well,” said Se Sangyoung, an analyst at Kiwoom Securities.