Morning Movers: The Trade War Gets Real
- Author: Megan Austin Apr 05, 2018,
Apr 05, 2018, 0:45
Fears of a trade war between the world's two largest economies returned to haunt markets on Wednesday, sending USA stocks tumbling and sinking European and Asian equities.
Yet trade worries were never far away.
Beijing has responded with a target list of 106 items imported from the United States worth a similar amount that would be hit by the same ad valorem tariff ("China retaliates for USA tariffs", Reuters, April 4).
Beijing will hit 106 American products, including soybean, automobile, and chemicals, with a 25-percent tariff in response to USA levies on Chinese goods, Bloomberg reports, citing a CCTV report of the State Council decision.
China announced on Tuesday that it aims to surpass Germany and Japan to become the world's second-most-powerful manufacturing nation behind the U.S.by 2035, and by 2045 it plans to be a world manufacturing powerhouse on par with the U.S. The initial targets will by USA scarp aluminium imports, rolled steel, fresh and dried fruit, nuts ginseng and wine and frozen pork, set at 25 (Al) and 15%, respectively.
The issue has been extensively discussed by officials, including the president and foreign minister, as well as in opinion commentaries ("China voice: Ten reasons China, U.S. can avoid Thucydides Trap", Xinhua, 2017).
Photos of Tiangong-1 hurtling towards Earth are terrifying: Should you worry?
A defunct Chinese space station is falling to Earth at 17,400 miles per hour and orbits about every 90 minutes. China's abandoned space station Tiangong-1 is out of control, and it's going to crash to Earth very soon.
"If someone wants a trade war, we will fight to the end". President Donald Trump's top economic adviser, Larry Kudlow, suggested the USA tariffs won't be implemented if China lowers barriers to trade.
The swing in risk sentiment put the pep back into bonds, with yields on US 10-year Treasury debt down two basis points at 2.76 per cent.
European markets sank in early trading.
US benchmark 10-year notes fell 2/32 in price to yield 2.7917 percent.
The American Soybean Association on Wednesday called on the Trump administration "to reconsider the tariffs that led to this retaliation". South Korea saw the big move, dropping 1. 6 percent and turned negative on the year. The S&P lost 40.75 points, or 1.56 per cent, to 2,573.7. Hormel jumped $1.65, or 4.8 percent, to $35.87. Those tariffs are widely considered a response to China's controversial Made in China 2025 industrial policy, which has drawn the ire of the United States government. The dollar also fell, tumbling 0.4 percent to trade at 106.14 yen, erasing some of the modest gains it had made following the tech rally on Tuesday. 2287, after easing from a high of $1. The euro hovered at $1.2296, after easing from a top of $1.2335 overnight, while the dollar index was 0.2 per cent lower at 90.
The Mexican peso and Canadian dollar both held firm after hitting a almost five-month and five-week highs, respectively in recent day on growing optimism about the prospect of a NAFTA trade deal.
However the latest USA action, targeting a wide range of Chinese manufacturing and electronic products was aggressive and the scale and nature of the Chinese response was also notable and appears to have taken financial markets by surprise.