Global markets fall as China hits back at US with new import tariffs
World markets plunged further on Tuesday following heavy losses on Wall Street after China delivered a swift rebuff to Donald Trump by imposing retaliatory tariffs on $60bn of US imports.
Beijing ignored warnings from Trump about the dangers of escalating the trade conflict and sent tremors through global markets by announcing a new 25% import duty on a range of US products.
In early trade on Tuesday, Hong Kong led losses when the market reopened after a long weekend. The Hang Seng Index sank 1.7% while Shanghai shed 0.2% and Tokyo was off 0.7% at the break.
Sydney and Singapore each dropped more than one percentage point, with Manila and Jakarta both down 1.6%. There were also losses in Taipei and Wellington, though Seoul edged up slightly.
Medha Samant, director of investment at Fidelity International, told Bloomberg TV: “In the short term, it looks like volatility is here to stay and we could see this risk-off, risk-on going on for a long time.”
The retreat came after the Nasdaq on Wall Street suffered its worst day of 2019 and the Dow ended at its lowest point in more than three months.
In the latest stage of the tit-fortat battle between the world’s two biggest economies, China targeted almost 2,500 products, from food and consumer goods to chemicals and machinery, and said the increases would come into force next month.
Apple, Boeing and Caterpillar were the biggest casualties of a global market sell-off as investors concluded that they would be among the companies most affected by China’s action.
The Dow Jones industrial average lost more than 600 points, both it and the S&P 500 recording their biggest losses since January, after hopes of a speedy resolution to the dispute were replaced by fears of a long and damaging trade war.
In London, the blue-chip FTSE 100 fell 39 points, or 0.55%, to end Monday at 7,163, its lowest level since 13 March, while the FTSE 250 index of mediumsized, more UK-focused companies, fell more than 1.2% to a six-week low. The Europe-wide Stoxx 600 index also hit a
two-month low, down 1.2%. Consumer goods-makers and technology firms led the fallers.
Trump has drawn up plans to extend US tariffs to the $300bn-plus of Chinese imports not currently targeted, while there were hints from Beijing that it would start to sell some of the US Treasury bonds it holds.
The US president took action last week after what the US considered backtracking by China’s president, Xi Jinping, on commitments contained in a 150-page draft trade deal between the two countries.
But despite warnings from Trump of the risks of retaliation, China said it would “never surrender” to US pressure.
In a series of tweets, Trump said: “I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China. You had a great deal, almost completed, & you backed out!”
He added: “There will be nobody left in China to do business with. Very bad for China, very good for USA! But China has taken so advantage of the US for so many years, that they are way ahead (Our Presidents did not do the job). Therefore, China should not retaliatewill only get worse!”
China criticised the White House for its “escalation of Sino-US economic and trade frictions, contrary to the consensus between China and the United States on resolving trade differences through consultations, jeopardising the interests of both sides and not meeting the general expectations of the international community.”
Andrew Hunter of Capital Economics, said China’s move would risk provoking Trump. “That could make the prospect of US tariffs being imposed on the remaining $300bn of Chinese imports – provisional details of which were due to be published by the US trade representative later on Monday – even more likely.”
China’s new 25% tariff will affect almost 2,500 items, from food and consumer goods to chemicals and machinery. Other products will soon incur a 20% or 10% additional levy.
China’s Global Times newspaper reported that Beijing was also considering cutting orders for new Boeing planes and boycotting US agricultural products.
Timme Spakman, economist at ING bank, said China’s response could have been harsher and showed that Beijing was keen to keep the door open for negotiations.
Trump ordered the tariff increases after talks in Washington with China’s vice-premier Liu He ended with no deal in sight.
The president suggested that manufacturers who make goods in China could shift production to other countries to avoid the tariffs.
Trump said in another Twitter post that the trade war would not have a significant impact on US trade. “We are right where we want to be with China. Remember, they broke the deal with us and tried to renegotiate. We will be taking in tens of billions of dollars in tariffs from China. Buyers of product can make it themselves in the USA (ideal), or buy it from non-tariffed countries.”