President Trump has announced plans to impose new tariffs on $300 billion of Chinese goods, escalating the trade war with Beijing and rattling investors.
Markets around the world fell in response, while government and business leaders decried the burden it would put on companies and consumers.
Japan added to the global tension by removing South Korea from a list of preferred trading partners, threatening supply chains for the tech industry.
The Chinese government will have to be very careful in its approach to future trade talks with the Trump administration, analysts say.
“With the direct hit to China’s economy still manageable, President Xi has more to lose – not least in appearing personally to be caving in – than he would gain from making changes to industrial policies that both he and the White House hawks believe have served China well,” Julian Evans-Pritchard, senior China economist at Capital Economics, wrote in a note Friday.
“As such we expect the tariffs to go ahead and furthermore that they will be raised, to 25% on all Chinese goods imports to the US, before long.”
Analysts at Citi Research said in a report Friday that they believe “China will become more cautious in dealing with Trump on trade.”
“Rather than giving in to the US demand, we expect China will firm up its bottom lines and formally use the strategy of waiting it out,” wrote analysts Li-Gang Liu, Xiaowen Jin and Xiangrong Yu.
China: We’re not afraid of a fight
President Donald Trump’s latest tariff proposal “seriously violates the consensus” reached with Chinese President Xi Jinping at the G20 in Osaka and “is not conducive to solving the problem,” China’s Ministry of Commerce spokesperson said in a written statement.
“If the US implements the tariff, China will have to take necessary countermeasures to resolutely defend the core interests of the country and the fundamental interests of the people. All the consequences will be borne by the US,” the spokesperson added.
The Ministry of Commerce said the move would have “a chilling effect” on the world economy.
“The Chinese side always believes that there is no winner in the trade war. It does not want to fight but is not afraid of a fight.”
South Korea plans retaliation against Japan in trade dispute
South Korea says it will respond in kind after Japan removed it from a list of countries that receive preferential treatment on trade. It’s the latest move in a dispute that threatens to reduce cooperation between two of the largest economies in Asia.
South Korea’s finance minister, Hong Nam-ki, said Friday that his government would take steps next week to exclude Japan from its own list of preferred trade partners.
“Although we will continue our effort for a diplomatic resolution, we will also take steps to exclude Japan from our whitelist as well and strengthen the export control,” he said. “We will announce a comprehensive plan early next week.”
Japan said earlier on Friday that it would remove South Korea from a so-called white list. Japanese exports to South Korea will now require additional screening to make sure they are not used for weapons and military applications.
The spat between the two countries started last month when Tokyo placed controls on exports of three chemical materials to South Korea. The materials are used to make computer chips, among other things.
Tension between the two countries has been rising for months, stemming in part from Japan’s colonial rule over the Korean peninsula. South Korea’s top court recently ruled that its citizens can sue Japanese companies for using forced Korean labor during World War II. Japan has denied that the two issues are linked.
Trade spat between Japan and South Korea escalates
Japan dropped South Korea as a preferred trading partner on Friday, escalating a dispute that threatens the global supply chain for smartphones and electronic devices.
The decision to remove South Korea from a so-called white list means that Japanese exports to South Korea now require additional screening to make sure they are not used for weapons and military applications.
South Korea was the only Asian country on the white list. Revoking its preferred status means the country will receive the same treatment as other Asian countries and territories, including Taiwan, Japan’s Chief Cabinet Secretary Yoshihide Suga said Friday.
“This is not a trade ban,” he added.
That’s not how Seoul sees it. South Korean President Moon Jae-in said the move was “reckless” and he threatened retaliation. His party accused Japan of waging “economic war.”
European stocks join global sell-off
European stocks have joined the global sell-off sparked by President Donald Trump’s threat to impose new tariffs on China.
Here’s a summary of the early action:
Germany’s DAX and France’s CAC 40 both dropped 2.2% at the open.
London’s FTSE 100 is down 1.5%.
The pain was spread across sectors. Shares in carmakers, consumer goods companies and banks posted losses in line with the broader market.
The euro was flat against the dollar. The British pound shed 0.2%, continuing the recent slide caused by fears that the country is headed for a disorderly Brexit.
The Swiss franc, which is seen as a safe haven in troubled times, strengthened 0.4% against the US dollar.
Global investors are running scared. “There hasn’t been much data to distract from trade war overnight,” Societe Generale strategist Kit Juckes wrote in a research note.
The next big event on the global markets agenda is the US jobs report for July, which will be published at 8:30 a.m. ET.
Trump announces new tariffs
President Donald Trump said Thursday that he would add new tariffs on $300 billion of Chinese-made products from September 1, which would essentially mean all Chinese goods coming into the United States are taxed.
“Trade talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional tariff of 10% on the remaining 300 billion dollars of products coming from China into our country,” he tweeted.
Later in the day, Trump said in remarks to reporters at the White House that he might still ratchet tariffs up to 25%, as he’s previously threatened — or even higher.
“It can be lifted in stages so we’re starting at 10% and it can be lifted up to well beyond 25%,” the president said. “But we’re not looking to do that, necessarily.”source CNN Business.
