The timing of Trump’s move is based in part on a calculation that with the US economy at its healthiest point in a decade, the country can handle whatever disruptions a trade war with China might bring.
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Bloomberg News cited China’s ambassador to the United States saying that the country is “looking at all options” in response to tariffs, which could include scaling back purchases of U.S. Treasuries.
US President Donald Trump had earlier announced new tariffs on $50 billion worth of Chinese goods, with the aim of reducing the $375 billion trade deficit the US has with China. In Tokyo, major exporters like Toyota and Sony helped to lead a 4.5 percent drop in the key index. Nvidia lost $3.74, or 1.5 percent, to $238.11. “It is an agreement between China and the US that this has to be reduced for the benefits of both countries”. China urged the Trump administration to resolve differences through dialogue, but so far, the U.S. seems unrelenting.
After Trump’s latest announcement, China said it is not afraid of a trade war with the USA and announced plans for reciprocal tariffs on $3 billion of imports from the US.
At midday, the Shanghai Composite index was down 3.27 percent at 3,156.89, after earlier hitting its weakest since February 12.
Cui said the Chinese side is clearly against any unilateral protectionist moves and a trade war, which “would hurt everybody, including the United States itself, and that would certainly hurt the daily life of the American middle-class people, the American companies and the financial market”.
The S&P 500 index dropped 55.43 points, or 2.1 percent, to 2,588.26. “That’s the concern. Once losing a market it would be naive to believe we could just flip a switch and get it back again – it takes time”. The Nasdaq Composite dropped 87.81 points, or 1.2 percent, to 7,257.47.
The jitters over trade tensions sent investors toward traditional “safe havens” like the Japanese yen, which strengthened against the USA dollar. China has said it may add its own tariffs to American goods imported into China, specifically targeting the ones that come from states where Trump supporters live – that’s farm states producing things like wine, apples, and ethanol. By midday, it was trading 0.54 percent higher at 93.880. The dollar fell to 104.96 yen from 105.61 yen.
US 10-year Treasury yields, which fell nearly 8 basis points on Thursday, were set for their biggest two-week fall since September.
On Thursday they fled stocks and bought bonds, which sent bond prices higher and yields lower.
Copper fell 3 cents to $2.99 a pound.
US crude futures were up 1.1 per cent at $64.99 per barrel after losing 1.3 per cent on Thursday and Brent gained 0.9 per cent to $69.53 per barrel.
“We’ve been told for our entire careers that trade wars made the Great Depression worse”.
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Iron ore futures on China’s Dalian Commodity Exchange lost more than 5 percent.
