United States stocks jump as investors re-assess trade war risk

05 April, 2018, 00:59 | Author: Elaine Woods
  • If the conflict occurred only between the US and China Việt Nam would have a good chance to export to the US

After an early jolt, stocks have rallied back and moved higher Wednesday as investors weighed whether back-and-forth tariff threats between the US and China could escalate into full-fledged trade hostilities, or if the two sides could eventually settle their differences. Late on Tuesday, the Trump administration announced 25 per cent tariffs on US$50 billion of annual imports from China, covering around 1,300 industrial technology, transport and medical products.

Wall Street opened sharply lower before paring some losses toward midday and trade fears also weighed global stocks. Investors fear a Pyrrhic battle that harms both economies, the two largest in the world.

"They're reassessing the valuation on the entire market", said Kinahan.

The early declines followed an announcement by the Chinese government that it plans to impose tariffs of 25 percent on a list of USA goods worth $50 billion, including soybeans and aircraft.

Most Asian indexes closed before China announced its tariff plan, but Hong Kong's Hang Seng was still trading and slumped 2.2 percent.

"Even though the numbers between China and the USA are comparable, it seems clear that China is trying to twist the knife", he said.

For example, China is the world's largest soybean importer and biggest buyer of US soybeans in trade worth about $14 billion previous year.

Industry groups renewed calls for the White House to change tack.

U.S. Commerce Secretary Wilbur Ross said China's response isn't expected to disrupt the U.S. economy.

Hours earlier, the U.S. government had unveiled a detailed breakdown of some 1,300 Chinese industrial, transport and medical goods that could be subject to 25 percent duties, ranging from light-emitting diodes to machine parts.

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In his first year in office, Trump's talk was tougher than his actions on trade. The unpredictability of the US government and its economic policies also adds uncertainty to the global economy and affects the manufacturing trends of China and the world, "but these unfavorable factors will not affect China's overall growth momentum", Zhou said.

China's retaliation came after trading hours for Japan's Nikkei, which added 0.2 percent in thin volume, while Chinese blue chips ended down 0.2 percent.

"All we have so far is jawboning", he says.

"While the near-term impact on the global economy of recent moves by both sides may be quite small, the risks of escalation are clear, with the seeds of more serious trade conflict apparent", Slater wrote in a note to clients.

"My view is this is more trade poker than it is trade policy", he said.

China will also impose levies on American whisky, cigars and tobacco, some types of beef, lubricants, and propane and other plastic products.

Talks are ongoing between the two sides to prevent the disagreement deepening, though China retains the option to respond to the latest USA measures with tariffs on US exports including soybeans, autos and aircraft parts. If somebody tries to impose a trade war upon us, we will fight.

President Donald Trump in Washington, D.C., on March 10.

"The way he's going now, he's got to compromise out to have a chance of keeping the Congress Republican in November".

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