Stocks, yuan drop on US tariffs move
Washington escalates trade row, stokes market fears
The Chinese yuan, stocks as well as US futures all slid on Wednesday, after US President Donald Trump fired another shot in the ongoing trade row with China, intensifying the market’s risk avoidance emotions.
On Tuesday night, the Trump administration released a list of $200 billion worth of imported Chinese goods to be slapped with 10 percent tariffs, escalating the current trade war between the two countries.
The proposed tariffs will not take effect immediately but will undergo a two-month review process by August 30, according to media reports.
However, the foreign exchange market and stock market immediately responded to the signs of escalation.
The Shanghai Composite Index slid 1.76 percent to end at 2,777.77 points, while the blue-chip CSI300 index went down 1.73 percent to end at 3,407.53 points.
The onshore yuan opened at 6.6694 against the greenback, over 300 pips weaker than the previous night’s closing. It was changing hands at around 6.66 during the afternoon trading session.
The People’s Bank of China (PBC), the country’s central bank, set the yuan’s midpoint rate at 6.6234 per dollar, slightly firmer than the previous fix of 6.6259.
On Wednesday, the deputy PBC governor warned that Chinese enterprises have to further enhance their awareness of risk avoidance.
Pang Gongsheng, also the admin- istrator of the State Administration of Foreign Exchange, was quoted by news portal yicai.com as saying that some enterprises are “running without cover,” and these types of actions not only easily make the market resonate at the macro level, but also put these enterprises in wider danger of exchange rates at the micro level.
US stock futures were also trading in the red, dropping between 0.2 percent and 0.9 percent, with the largest decline seen on the Dow Jones Industrial Average.
Lian Ping, an economist with the Bank of Communications, told the Global Times that in the market, reactions to such measures are usually the strongest between the announcement of the tariffs and their implementation, the interval of which can lead to low market expectations and bearish performances.