China to tariff $75bn of US goods in trade war escalation
China has announced it will tariff $75bn of US goods in the latest escalation in the long-running trade war with the US.
China’s commerce ministry said in a statement it would impose additional tariffs of five and 10 per cent on over 5,000 US goods including agricultural products, crude oil, small aircraft and cars.
The move comes after US President Donald Trump pledged three weeks ago to impose 10 per cent tariffs on $300bn of Chinese goods, which would mean almost all of the country’s exports to the US are levied.
Trump later backtracked, postponing the imposition of some of the tariffs until December.
Chinese ministry of commerce spokesman Gao Feng said yesterday that despite the postponement, “if the United States rides roughshod over China’s opposition and impose any new tariffs, China will be forced to adopt retaliatory actions”.
The escalation sent European stock markets tumbling after they spent the morning in the green. It is sure to see US equities open down at the bell.
Germany’s Dax gave up its gains and was down 0.4 per cent by 2.10pm UK time. France’s CAC 40 had fallen 0.3 per cent, while the pan-European Euronext 100 had dropped 0.2 per cent.
The Down Jones Industrial Average and the S&P 500 both dropped 0.4 per cent to 26,151 points and 2,910 point respectively. Nasdaq dropped 0.6 per cent to 7,948.
Investors bought safe-haven assets such as the 10-year US government bond, known as a Treasury, the yield on which fell one basis point (0.01 percentage points) to 1.609 per cent. The 10-year German government bond yield fell a similar amount to minus 0.649 per cent. Yields move inversely to prices.
The Brent crude oil price dropped 2.5 per cent shortly after the news broke to $58.41. The tariffing of US crude oil could damage demand.
‘Back with a vengeance’
“China is back with vengeance and today’s action has taken the on going trade war between the two countries into another territory,” said Naeem Aslam, an analyst at Think Markets.
“Of course, the biggest fear for markets is now is the counter reaction from Donald Trump who has been giving the wrong signal to markets that trade war issue isn’t a problem. Mr Trump needs to understand that China isn’t Iran, it is going to bite back.”
Speaking to Fox Business Network as the tariffs were announced, US trade envoy Peter Navarro said: “Negotiations will continue, as they have been. They will be done behind closed doors.”
“China is bearing the entire burden by slashing their prices, by slashing their currency value and by the way they are haemorrhaging, haemorrhaging their supply chain out to the rest of the world and back here to America.”
News of the tariffs presents another problem for US Federal Reserve chair Jay Powell, who will give an eagerly-awaited speech in Jackson Hole, Wyoming this afternoon.
Investors’ hopes that Powell will signal further interest rate cuts are coming will have been boosted by China’s announcement.
Trump, who has kept up unprecedented pressure on Powell to cut rates further, tweeted following the news: “Now the Fed can show their stuff!”