Wall Street tumbles as US-China trade spat escalates

22 June 2018, 03:28 | Andres Norman

Trump threatens new tariffs on Chinese imports

Wall Street reels as US-China trade spat and falling oil prices spook investors

USA light crude oil hit a two-month low of US$63.59 a barrel before recovering somewhat to trade at US$64.72, down 30 cents, by 1100 GMT.

Underscoring the impact on Chinese companies from worsening Sino-U.S. relations, shares of ZTE Corp, the technology firm caught in the cross-fire of the trade spat between the two countries, slumped further on Tuesday.

Over the weekend, China retaliated against the United States imposition of 25% tariffs on $34bn of Chinese goods, by targeting the same value of imports.

The Canadian government believes a deal to update NAFTA is still possible despite a USA move to impose tariffs on Canadian and Mexican steel and aluminum, Foreign Minister Chrystia Freeland said in Ottawa on Tuesday.

Electronic broads were covered in red as investors reacted quickly after Trump announced on Monday night that he had asked the US Trade Representative to identify $200 billion worth of Chinese imports for additional tariffs at 10%. Trump says he is taking action because China has raised tariffs on US exports and "has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology". Meant in part to ease the effects of the Depression by protecting American industry and agriculture from foreign competition, the act instead helped prolong the downturn. But the rhetoric is intensifying, with Trump lashing out at Beijing over its threat to retaliate against the administration's latest proposed tariffs.

"Further action must be taken to encourage China to change its unfair practices, open its market to United States goods and accept a more balanced trade relationship with the United States", Trump said in a statement. "Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong", he said. Asian stocks had been poised for a mixed start to trading that sees Chinese markets reopen for the first time since trade tensions with the USA escalated.

The Dow Jones Industrial Average .DJI fell 287.12 points, or 1.15 percent, to 24,700.35, the S&P 500 .SPX lost 11.18 points, or 0.40 percent, to 2,762.57 and the Nasdaq Composite .IXIC dropped 21.44 points, or 0.28 percent, to 7,725.59. The logistics company's shares were the biggest weight on the Dow Transports, which fell 1.7 percent. The CAC 40 of France fell 1.1 percent and in London the FTSE 100 slipped 0.4 percent.

That prompted a sharp response from Beijing, with China's Commerce Ministry accusing the United States of "extreme pressure and blackmail".

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Derek Scissors, a China scholar at the American Enterprise Institute, a Washington think tank, spelled out the reality of the situation when he said that Beijing has almost exhausted U.S. imports to target.

Despite the threat from Trump, China vowed to retaliate with "strong" countermeasures if the US goes ahead with the new tariffs.

That would leave less than $100 billion in US goods to subject to a tariff hike, far short of the $200 billion Trump is threatening. Russian Federation has calculated the damage of its proposed tariffs to be about $537.6 million, while Oreshkin said Tuesday that the first stage of tariffs against the US would amount to about $93 million.

The impact likely would be temporary as USA oil becomes less attractive to Chinese buyers.

Economists have said the impact on the US economy would be muted.

Brent crude futures fell 0.8 percent to $74.76 a barrel after rallying 2.5 percent overnight, while US light crude futures retreated 0.9 percent to $65.27. China retaliated by raising import duties on $34 billion worth of American goods, including soybeans, electric cars and whiskey.

Trump is gambling that Beijing has the most to lose.



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