Stocks fell and metals prices slumped to their lowest in a year on Wednesday, as U.S. threats of tariffs on an additional $200 billion worth of Chinese goods pushed the world's two biggest economies ever closer to a full-scale trade war.
The latest news on the trade front came after Washington slapped 25% tariffs on $34 billion of Chinese imports last week, a move against which China immediately retaliated with matching tariffs on the same amount of USA exports to China.
The move is a major escalation in a brewing trade war between the world's two largest economies. Shares also dropped in Taiwan and Southeast Asia. That has been waiting approval from China's antitrust regulator for months, leading to speculation among investors that the deal is being held hostage to the trade dispute with Washington.
The list of products facing tariffs is long and varied - everything from vacuum cleaners and TV components to bricks, tires and badger hair shaving brushes (!) (I'll pull together a longer list ASAP). The Trump administration has tried to limit the impact of the trade war on consumers and any backlash that it might prompt, but the scale of these tariffs make it next to impossible to protect them. The broader CSI300 transport sub-index lost 2.6 percent.
China's government vowed Wednesday to take "firm and forceful measures" as the United States threatened to expand tariffs to thousands of Chinese imports like fish sticks, apples and French doors, the latest salvo in an escalating trade dispute that threatens to chill global economic growth.
Follow our live blog as China responds to latest tariff threats. "If the US goes ahead with more, China needs a combination of tools and it is prudent to guard against downside risk to growth too".
"There certainly is going to be pronounced risks mainly because we have now moved on to the tit-for-tat-for-tit phase of it", said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore.
"That $200 billion worth of goods subject to tariffs represents less than 1 percent of [gross domestic product], and the 10 percent tariff on those goods less than a tenth of percent", Atkinson says.
China slammed the USA threat to expand tariff hikes to imports including apples, fish sticks and French doors as a "totally unacceptable" escalation of their trade battle and vowed Wednesday to protect its "core interests".
If 3M (MMM), Caterpillar (CAT), and Walmart (WMT) are the canaries in the trade-war coal mine as Nicholas Colas, co-founder of DataTrek Research detailed in his morning newsletter on Tuesday, all is not well.
The onshore yuan tracked its offshore counterpart lower with traders closely watching the key 6.7 per dollar level as pressure mounted on the currency.
China has become a key trade partner for US energy exports, and potential tariffs on USA energy goods could hurt USA producers and industries.
The Canadian dollar was a shade higher at C$1.3201 per dollar following a loss of 0.75 percent the previous day.
Ivanka's products remain untouched by these tariffs and the fashion line is continuing to work with and create order contracts for Chinese shoe suppliers, such as Chengdu Kameido Shoes and Hangzhou HS Fashion.
Copper futures rose 1.2% and aluminum futures edged down 0.2% after earlier gains.
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