Markets plunge as Trump threatens new China tariffs

Xi Jinping

Xi Jinping

Trump on Sunday raised pressure on Beijing to strike a trade deal by announcing he would increase tariffs on US$200 billion of Chinese imports Friday to 25 per cent from 10 per cent.

Trump has threatened to increase those tariffs before but has pushed back plans to raise them twice.

Not only will big volumes of Chinese seafood and other products at 10% go to 25% Friday, but some $325bn of Chinese goods not now subject to tariffs - presumably including cod, pollock and salmon fillets, which were all removed from the US Trade Representative's list a year ago - will go to 25%, according to Trump.

Donald Trump has sent European shares tumbling downwards with a string of surprise tweets about China, ratcheting up tensions with new tariffs on Chinese goods.

"Trump has taken the proverbial sledgehammer to the walnut this morning and the only two words likely to be on the minds of traders and investors this week are "trade talks", Jeffrey Halley, a senior market analyst at OANDA, said.

"All that depends on the attitude of the United States", the official said.

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China could retaliate and hit back with higher tariffs on American imports, as well as tougher regulatory hurdles for USA companies doing business in China.

The 10-percent tax on some $200 billion of non-tech-related goods will now go up to 25-percent.

In currency trading, the US dollar firmed against most major currencies but lost ground to the Japanese yen as investors turned to safe-haven currencies after the Trump tweets.

The S&P 500 Index fell as much as 1.6 percent on Monday before paring losses.

"Nonetheless, Trump's tweet allusions to tariffs being "partially responsible for. great (US) economic results" does raise the threat of misguided trade policy" from the USA, it said.

Hu Xijin, the editor-in-chief of Global Times, made it clear that Trump's "trick" was doomed to fail.

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Shanghai's benchmark index fell 5.6 percent Monday despite China's efforts to limit the anticipated selloff, Bloomberg reported. St. Louis Federal Reserve Bank President James Bullard and Chicago Fed President Charles Evans, both policy voters this year, expressed caution Friday over weak prices and said the central bank may have to act to lift inflation out of a persistently low trend. The president said last month that Washington and Beijing were close to reaching a "monumental" agreement. He said that he believed talks were progressing too slowly and the tariff increase could happen "shortly".

"China's leaders have become more accustomed to Trump's approach, although it's very hard to get used to Trump", Shi said, adding that the American president appeared to be all about grandstanding and claiming political victories.

Markets opened sharply lower after Trump said via Twitter that he planned to raise tariffs on imports from China to 25 per cent from 10 per cent.

Fears about a further escalation caused a slump in world stock markets towards the end of a year ago.

"That may not be forever if the talks don't work out", he said.

But sticking points still remained, including how to enforce any accord and the stumbling block of what Washington sees as Beijing's state-subsidies model which favors China's corporate juggernauts.

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