mo4ch:>Trump tariffs: Markets fall as trade war fears mount - Mo4ch News


Tuesday, June 19, 2018

mo4ch:>Trump tariffs: Markets fall as trade war fears mount

Trump tariffs: Markets fall as trade war fears mount

Trump tariffs: Markets fall as trade war fears mount

  • 19 June 2018

Traders at the New York Stock ExchangeImage copyright
Getty Images

Stock markets have fallen around the world in the wake of President Trump's latest tariffs threat to China.

The Dow Jones was down more than 300 points (1.6%) when New York trading opened and Asian and European markets had also fallen sharply earlier.

Mr Trump has threatened to put tariffs on an extra $200bn (£141bn) of Chinese goods, sparking fears of a trade war.

The US president said the tariffs would be imposed if China "refuses to change its practices".

He condemned China's "unfair practices related to the acquisition of American intellectual property and technology" and added: "Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong."

The markets reacted badly with China's Shanghai Composite doing the worst in Asia, ending the day down 3.8%. In Europe, Germany's Dax index and France's Cac 40 were both down by about 1.5%.

Away from Mr Trump's dispute with China, Russia announced it would impose tariffs on certain American goods in response to the recent tariffs placed on steel and aluminium imports by the US.

Russia's Economy Minister, Maxim Oreshkin, said the tariffs would target goods of which the Russians already had domestic equivalents.

How did the latest spat unfold?

Last week, Mr Trump confirmed that the US would impose 25% tariffs on $50bn worth of Chinese goods.

Beijing responded by saying it would hit 659 US products worth $50bn - including agricultural products, cars and marine products - with a similar tax.

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Media captionHow hogs and Harleys became weapons in a looming trade war

Late on Monday, Mr Trump added that new tariffs would "go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced".

"If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200bn of goods."

China's commerce ministry reacted swiftly, saying: "If the US acts irrationally and issues a list, China will have no choice but to take comprehensive measures of a corresponding number and quality and take strong, powerful countermeasures."

What do the experts say?

A paper published by Canadian think tank the CD Howe Institute suggests that Mr Trump's threats are having an effect on US manufacturing by using "uncertainty as a new weapon in trade protection".

The institute's Meredith Crowley and Dan Ciuriak have written a study in which they say uncertainty acts like a non-tariff barrier to impede trade and investment.

Its purpose is to force American companies to move manufacturing bases abroad back into the US and to reduce incentives for US firms to invest abroad.

Ronald Temple, head of US equities and co-head of multi-asset investing at Lazard Asset Management, said: "The post-war multi-lateral system largely rests on the US's credibility and its commitment to the rules and its allies.

"This credibility can be eroded by an approach that lacks clear objectives. It's getting harder for businesses and investors to shrug off this uncertainty."

How has the dispute escalated?

  • January 2018 - The US announces tariffs on imported solar panels and washing machines

  • March - Mr Trump unveils plans for a 25% tariff on steel imports and a 10% charge on aluminium

  • April - China announces tariffs on US imports ranging from 15% to 25% on goods ranging from steel pipes to pork

  • May - The US and China put tariff plans "on hold" after talks

  • June - Mr Trump decides to push on with plans to impose tariffs in July

A potential political cost

Image copyright

BBC economics correspondent Andrew Walker

Being tough with China plays well with many of President Trump's supporters, actual and potential, at a time when he is looking ahead to the Congressional elections in November.

It could also be that he thinks China will run out of US imports against which to retaliate.

After all, the US sells a lot less to China than the other way around.

But there is also a potential political cost for the president. Many in the Republican Party, who are more instinctively in favour of free trade, don't think this is the right way to tackle problems with China.

And as Mr Trump increases the range of goods subject to tariffs it becomes harder for American importers and consumers to avoid the cost by finding alternative suppliers.

In the separate dispute about steel and aluminium tariffs, he also has to contend with the politically targeted retaliation that other countries such as Mexico, Canada and the EU have in hand, intended to hit important states in the mid-term elections.

What products are affected?

The US tariffs previously announced affect more than 800 Chinese products from aircraft tyres to turbines and commercial dishwashers worth $34bn and are due to come into effect on 6 July.

In his latest statement, Mr Trump said that he had asked his advisers to identify additional Chinese products on which to impose new tariffs.

The White House says China encourages transfer of intellectual property - design and product ideas - to Chinese companies, through measures such as requiring that foreign firms share ownership with local partners to access the Chinese market.

Source : BBC News - Business

Trump tariffs: Markets fall as trade war fears mount

Trump tariffs: Markets fall as trade war fears mount