Markets rattled as Trump escalates China trade war with tariffs on $200bn of imports – business live

 

Powered by Guardian.co.ukThis article titled “Markets rattled as Trump escalates China trade war with tariffs on $200bn of imports – business live” was written by Graeme Wearden, for theguardian.com on Wednesday 11th July 2018 17.20 Asia/Kolkata

Sir Alan won’t be passing the sugar to Trump at Blenheim

Blenheim Palace in Woodstock, Oxfordshire
Blenheim Palace in Woodstock, Oxfordshire Photograph: PA

Tomorrow Donald Trump arrives in the UK for a controversial visit that will be marked by protests in London, and a swanky dinner at Blenheim Palace.

Some of the great and the good of British business will be there….but it appears entrepreneur Sir Alan Sugar won’t be wielding a fish knife in Woodstock tomorrow.

My colleague Rob Davies asked Lord Sugar to check his diary….

It’s not clear whether Sir Alan has nobly declined to meet the US president as a matter of principle, or simply been missed off the guest list altogether.

Either way, it means the two hosts of The Apprentice won’t be able to swop anecdotes about boardroom bloodletting.

It might be for the best, though. Back in 2012, Sugar and Trump clashed over plans to build wind turbines in Scotland, leading to this unedifying exchange:

Perhaps we’d better not let them get too close to sharp implements, and each other…

Updated

Chinese yuan weakens

Newsflash: The Chinese yuan is weakening, as anxiety over the trade war builds.

The yuan fell through the 6.7 mark against the US dollar in offshore trading, down from 6.65 yuan to the US dollar last night.

The yuan against the US dollar
The yuan against the US dollar Photograph: Bloomberg

The 6.7 point is seen as an important psychological point for the yuan against the US dollar — previously, the People’s Bank of China has intervened to prevent the currency weakening beyond this point.

It’s not just badger hair on the list!

The FT have spotted that human hair imported from China to the US could soon face a 10% tariff. Live eels, feathers and ‘beaver heads, tails and paws’ are also among the thousands of products facing new levies.

Trade war is reaching ‘point of no return’

Donald Trump is taking the trade dispute with China to the dangerous point where neither side can back down, argues Bloomberg.

They say that the new tariffs on $200bn of Chinese imports outlined overnight could force Beijing to escalate the dispute (it’s either that or a humiliating surrender), which could have dangerous consequences.

China has seven weeks to make a deal or dig in and try to outlast the U.S. leader. President Xi Jinping, facing his own political pressures to look tough, has vowed to respond blow-for-blow. He’s already imposed retaliatory duties targeting Trump’s base including Iowa soybeans and Kentucky bourbon.

Yet matching the latest U.S. barrage would force China to either levy much higher tariffs or take more disruptive steps like canceling purchase orders, encouraging consumer boycotts and putting up regulatory hurdles. Not only does that risk provoking Trump to follow through on threats to tax virtually all Chinese products, it could unleash nationalist sentiment on both sides that fuels a deeper struggle for geopolitical dominance.

“It’s already past the point of no return,” said Pauline Loong, managing director at research firm Asia-Analytica in Hong Kong. “What’s next is not so much a trade war or even a cold war as the dawn of an ice age in relations between China and the United States.”

The trade war is coming to American bathrooms.

Personal deodorants, antiperspirants, bath salts, shampoos, eye and lip make-up, soap and manicure preparations are all on the new list released by the US Trade Representative last night.

So unless America backs down, these products will be around 10% more expensive this autumn.

Manure spreaders, shark fins, cod-liver oil, baseball mitts and bicycle speedometers are all also on the list of Chinese goods facing 10% tariffs.

So, weirdly, are “footwear of asbestos”…..

David Madden, market analyst at CMC Markets UK, sums up the situation:

Stock markets in Europe are firmly in the red as President Trump outlined plans to impose a fresh round of tariffs on China. The US president has lined up tariffs on $200 billion worth of Chinese goods as a way of showing Beijing he means business.

There will be a two month review process, and a hearing in late August. The threat of another round of tariffs has rattled investors, just as market confidence was picking up.

China will have to think creatively when it hits back against America’s tariffs.

Beijing cannot simply simply slap a reciprocal 10% tariffs on $200bn US goods, because it actually only imported $150bn of goods from America last year.

This chart shows:

In theory, Beijing could impose a higher tariff, to create the same economic impact. Or it could target the services sector – where America ran a surplus with China.

But if China does retaliate again, then Donald Trump could hit back with further tariffs. America imported around $500bn of stuff from China last year – giving Trump another $250bn of ammunition.

America could suffer economic damage if these new tariffs are imposed in September, says Cailin Birch, global analyst at the Economist Intelligence Unit.

He explains:

The proposed list of $200bn worth of goods includes a number of industrial inputs and components that would squeeze US companies’ supply chains and ultimately raise consumer prices.

And this, at a time when US exporters (particularly of agricultural products and manufactured goods including clothing and machinery) will be suffering from weaker external competitiveness, as a result of the tariffs imposed by China–as well as the by EU, Canada and Mexico, as part of a related dispute.

In some areas, China will continue to rely on (now more costly) US imports, including soybeans, which will raise inflationary pressures in China. In others areas, however, China will eventually divert its trade flows and source these goods from elsewhere.

Russ Mould, investment director at stock brokers AJ Bell, says investors are scrambling to put their money into safe assets toda:

“Plans by the US for an additional $200bn of tariffs on Chinese goods has caused investors to lose their appetite for risk and seek solace in more defensive sectors such as consumer goods and utilities.”

European stock markets are not a pretty picture this morning, as trade war worries hit stocks.

In London the FTSE 100 is now down by 105 points, or 1.3%. The Stoxx 600, which tracks the biggest companies in Europe, is down 1%.

Mining companies are among the top fallers in the City, dragged down by today’s tumble in commodity prices.

European stock markets this morning
European stock markets this morning Photograph: Thomson Reuters

Trump’s decision to kick off the process of imposing tariffs on $200bn of Chinese goods has clearly hit confidence.

Fiona Cincotta, senior market analyst at City Index, explains:

Things were going so well.

After four days of straight increases in US stock markets, mainly prompted by the looming earnings season which is expected to show a very respectable growth of about 20% this quarter for the S&P 500, stock markets in Asia, Europe, the US and most of the major commodities were plunged into red this morning, courtesy of the latest US trade tariff decision….

In commodities the board was also almost uniformly red with declines in Brent Crude, gas, precious metals and wheat prices. Worse hit was copper, trading down 3.2% on the day.

With China being the single biggest global buyer of base metals, frequently accounting for about half of global trade in the likes of copper, aluminium, nickel and zinc, investors were spooked by the intensifying trade tit-for-tat.

Not only will this be negative for China’s demand for metals but will also affect FTSE heavyweights such as Rio Tinto, Glencore and BHP Billiton and a whole host of medium sized and smaller metals producers.

America is now conducting a two-month consultation on these proposed tariffs, meaning they could be imposed in September.

Paul Donovan of UBS points out that tariffs are actually an additional sales tax, as they make imports more expensive. He says:

President Trump once again prepared to lower the yoke of additional taxation onto the shoulders of US consumers.

Commodity prices are being hit hard today, with zinc dropping by 6% in Shanghai and copper down around 3.5%.

Traders are worried that these new tariffs will dent demand for metals, especially if Chinese growth is hit.

Which Chinese goods are being targeted?

A badger hair shaving brush
A badger hair shaving brush

The list of Chinese goods facing new 10% tariffs at the US border is long and varied.

Thousands of individual products are being targeted. I’ve just speed-read the list, here are some highlights:

  • Meat, such as frozen swine and frogs legs
  • Fish, including live trout, tuna, turbot,
  • Vegetables, such as butter, onions, garlic, fruits and nuts
  • Drinks such as malt beer, orange juice, rice wine
  • Various tobacco products, including cigarettes and cigars
  • Building products such as gypsum and sandstone
  • Commodities including copper, nickel, lead and tin ores
  • Chemicals such as Chlorine, argon, oxygen, barium and mercury
  • Industrial products, such as metals, tires, leather, fabrics, wood and papers.
  • Consumer products such as electric lamps, mattresses, furniture, and camera equipment
  • Electronic kit such as TV components

More unusual products on the list include

  • Badger hair for brushmaking
  • Bovine semen
  • Dog and cat food.
  • Antiques at least one hundred years old
  • Postage stamps

You can read the full list here

Our Beijing correspondent, Lily Kuo, reports that China has heavily criticised America’s move.

She writes:

In Beijing, Li Chenggang, assistant minister at the ministry, said at a forum in Beijing that the latest US proposals interfered with the globalisation of the world economy and that China’s support for a multilateral trade system would not change.

An English-language editorial in the state-run China Daily that has now been taken down said, without mentioning the new tariffs. “China has no option but to fight fire with fire. It has to resolutely fight back while taking proper measures to help minimise the cost to domestic enterprises and further open up its economy to global investors.”

Another editorial in China Daily said, “If Trump launches an all-out trade war, the US economy and society may not be able to withstand the impact of countermeasures from China and other economies.”

More here:

Duncan Innes-Ker of the Economist Intelligence Unit points out that America is now targeting low-value manufacturing goods.

This could drive production out of China, perhaps to Vietnam and Mexico.

America’s new planned tariffs could have a serious impact on China’s factories.

China exports around $500bn of goods to the US each year. If these latest tariffs go through, then around half those goods will arrive with additional levies slapped on them.

That could hurt demand for Chinese goods in America, creating damage in China and beyond.

As Zhu Huani of Mizuho Bank put it:

“Given the magnitude and breadth of the tariff list, the impact is expected to ripple through supply chains and cause collateral damage on regional economies”.

Britain’s FTSE 100 index has fallen 60 points, or 0.8%, to 7630 in early trading.

Other European markets are also in the red, as trade war fears ripple across the trading floors again.

Chinese shares slide

The Chinese stock market slumped by over 2% after America announced it was targeting another $200bn of imports.

The CSI 300 shed 77 points to 3,390, back towards the 18-month low struck last week.

Asian stock markets today
Asian stock markets today Photograph: Bloomberg TV

Konstantinos Anthis, head of research at ADSS, says there is shock at Washington’s latest move.

This new $200 billion salvo would be a considerable step up in the trade spat between the world’s strongest economies and the odds of this dispute taking a toll on global growth are now mounting.

The European and US futures are reflecting investors’ nervousness and the gains seen this week are now under threat

The agenda: Trump fires new salvo in trade war

Shipping containers being loaded on and off at cargo ship at the Conley Shipping Terminal in Boston, Massachusetts.
Shipping containers being loaded on and off at cargo ship at the Conley Shipping Terminal in Boston, Massachusetts. Photograph: Cj Gunther/EPA

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Global markets are rattled this morning after America escalated the deepening trade war between the two countries.

Overnight, Donald Trump began the process of slapping 10% tariffs on a further $200bn of imports from China, on top of the $34bn (soon to be $50bn) imposed last week.

The move is a significant escalation of the trade war between Washington and Beijing, further raising the dangers of a major economic shock.

US trade representative Robert Lighthizer announced that the US was acting because China had not heeded previous warnings.

For more than a year, the Trump administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition.

We have been very clear and detailed regarding the specific changes China should undertake. Unfortunately, China has not changed its behaviour — behaviour that puts the future of the US economy at risk.”

The list of products facing tariffs is long and varied — everything from vacuum cleaners and TV components to bricks, tires and badger hair for shaving brushes (!) (I’ll pull together a longer list ASAP).

The move has been swiftly and heavily criticised by China, which said it was “totally unacceptable” for America to keep escalating the trade dispute.

Investors have also reacted badly, with shares and emerging market currencies falling overnight.

The MSCI index of Asia-Pacific shares outside Japan fell 1.1 %, while Japan’s Nikkei dropped by 1.1%.

European stock markets are expected to follow Asia’s lead, as economics warn that a trade war would cause serious economic harm.

The agenda

  • 3pm BST: Bank of Canada’s interest rate decision
  • 4.30pm BST: Bank of England Governor Mark Carney speaks at a conference on the Global Financial Crisis in Massachusetts

Updated

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Markets rattled as Trump escalates China trade war with tariffs on $200bn of imports - business live - NORTH INDIA KALEIDOSCOPE

Rajesh Ahuja

I am a veteran journalist based in Chandigarh India.I joined the profession in June 1982 and worked as a Staff Reporter with the National Herald at Delhi till June 1986. I joined The Hindu at Delhi in 1986 as a Staff Reporter and was promoted as Special Correspondent in 1993 and transferred to Chandigarh. I left The Hindu in September 2012 and launched my own newspaper ventures including this news portal and a weekly newspaper NORTH INDIA KALEIDOSCOPE (currently temporarily suspended).