China strikes back at US in trade war
STOCKS CRASH AFTER BEIJING ISSUES $ 50B LIST OF GOODS FOR TARIFF HIKES
China yesterday issued a $ 50 billion list of US goods including soybeans and small aircraft for possible tariff hikes in an escalating and potentially damaging technology dispute with Washington.
The country’s tax agency gave no date for the 25 per cent increase to take effect and said it will depend on what President Donald Trump does about US plans to raise duties on a similar amount of Chinese goods.
Beijing’s list of 106 products included the biggest US exports to China, reflecting its intense sensitivity to the dispute over American complaints that it pressures foreign companies to hand over technology. The clash reflects the tension between Trump’s promises to narrow a US trade deficit with China that stood at $ 375.2 billion in goods last year.
Stocks fell on the news. The Dow Jones Industrial Average dropped almost two per cent at the open yesterday as big US manufacturers and chipmakers bore the brunt. The market later recovered slightly. Boeing and Caterpillar led the slide as a raft of major US firms saw millions knocked off share values.
Trump remains defiant
Trump said a trade war with China was “lost many years ago” by his predecessors, sounding a defiant tone a day after his administration slapped tariffs on 1,333 Chinese products. “We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US,” Trump said in a Twitter posting. “Nowwe have a Trade Deficit of $ 500 Billion a year, with Intellectual Property Theft of another $ 300 Billion. We cannot let this continue!
In a subsequent message, Trump said the ongoing spat has little downside for the US given the current trade imbalance between the two countries. “When you’re already $ 500 Billion DOWN, you can’t lose!” he tweeted.
To Wall Street money managers who make bets for a living, US President Donald Trump’s aggressive stance against China on trade looks like a high- stakes poker hand — but they believe they can play it for all it’sworth.
Fears that Trump could set off a trade conflict have roiled Wall Street sinceMarch 1, when the president announced plans to impose tariffs on imported steel and aluminium, risking retaliation from major trade partners like China, Europe and neighbouring Canada.
It’s been a roller- coaster ride, with markets slumping after Trump last Friday moved to impose up to $ 60 billion ( Dh220 billion) in tariffs on some Chinese imports and China declared plans to retaliate with duties of up to $ 3 billion of US imports even as it urged the United States to “pull back from the brink.” China’s willingness to negotiate spurred a rebound on Monday, though jitters in the tech sector drove markets backdown onTuesday.
Investors remain concerned about a trade war between the world’s two largest economies, but some big players are sanguine about their prospects to make money even as they try and dissect Trump’s strategy on trade.
The former celebrity businessman on March 2 tweeted, “trade wars are good, and easy to win,” shocking economists who cite evidence that trade wars in the past have been destructive to economies involved.
“Other administrations have gone to trading partners like China and asked for a fairer deal, only to get a cigar put out on their forehead,” said Steve Chiavarone, a portfolio manager at Federated Investors. “I suspect Trump’s bucking of norms is absolutely part of his negotiating tactics.” Chiavarone and others said they remain confident the S& P 500 will rise significantly this year.
“So far you are talking about small amounts of tariffs in niche sectors,” said Phil Blancato, head of Ladenburg Thalmann Asset Management in New York. “For anyone who is looking for an opportunity to enter the market here at better valuations, this is it.”
The Art of the Deal
“He has shown himself to act aggressively, quickly and unilaterally, and that’s brought China to the negotiating table,” said Ben Phillips, chief investment officer of EventShares exchange traded funds. “I truly think they are worried about him taking unilateral action and harming China’s economy.” Fears of a trade war, which could hurt US multinationals
and dull the benefits of deep corporate tax cuts enacted this year, have helped push the S& P 500 down nearly 4 per cent since the end of February.
The Trump administration has demanded that China immediately cut its $ 375 billion trade surplus with the United States by $ 100 billion, a position seen by some as an opening tactic in a long negotiation.
China could respond to US measures with a range of tariffs aimed at US multinationals, or even farmers in rural regions who helped Trump win the 2016 presidential election.
Trump’s bellicose stance with US trade partners reflects a negotiating style outlined in his 1987 book, Trump: The Art of the Deal, said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York. “You propose something horrific, and then when you pull back,” Pursche said. “The problem is the other side isn’t dumb. Eventually, they’re going to figure that out.”