All the day’s economic and financial news, as America begins process of imposing 10% tariffs on thousands more products from China
- Latest: FTSE 100 down 100 points in nervy selloff
- Introduction: US to add tariffs to $200bn of Chinese imports
- Analysts: Trade war could hurt global growth
- List: meat, vegetables, chemicals and badger hair all hit
- Consultation underway: tariffs could be imposed in September
Newsflash: The Chinese yuan is weakening, as anxiety over the trade war builds.
The yuan fell through the 6.7 mark against the US dollar in offshore trading, down from 6.65 yuan to the US dollar last night.
It’s not just badger hair on the list!
The FT have spotted that human hair imported from China to the US could soon face a 10% tariff. Live eels, feathers and ‘beaver heads, tails and paws’ are also among the thousands of products facing new levies.
Badgers and eels: Trump’s more unusual China tariffs https://t.co/zfLypZ7Qnk
Donald Trump is taking the trade dispute with China to the dangerous point where neither side can back down, argues Bloomberg.
They say that the new tariffs on $200bn of Chinese imports outlined overnight could force Beijing to escalate the dispute (it’s either that or a humiliating surrender), which could have dangerous consequences.
China has seven weeks to make a deal or dig in and try to outlast the U.S. leader. President Xi Jinping, facing his own political pressures to look tough, has vowed to respond blow-for-blow. He’s already imposed retaliatory duties targeting Trump’s base including Iowa soybeans and Kentucky bourbon.
Yet matching the latest U.S. barrage would force China to either levy much higher tariffs or take more disruptive steps like canceling purchase orders, encouraging consumer boycotts and putting up regulatory hurdles. Not only does that risk provoking Trump to follow through on threats to tax virtually all Chinese products, it could unleash nationalist sentiment on both sides that fuels a deeper struggle for geopolitical dominance.
The trade war is coming to American bathrooms.
Personal deodorants, antiperspirants, bath salts, shampoos, eye and lip make-up, soap and manicure preparations are all on the new list released by the US Trade Representative last night.
Manure spreaders, shark fins, cod-liver oil, baseball mitts and bicycle speedometers are all also on the list of Chinese goods facing 10% tariffs.
So, weirdly, are “footwear of asbestos”…..
David Madden, market analyst at CMC Markets UK, sums up the situation:
Stock markets in Europe are firmly in the red as President Trump outlined plans to impose a fresh round of tariffs on China. The US president has lined up tariffs on $200 billion worth of Chinese goods as a way of showing Beijing he means business.
There will be a two month review process, and a hearing in late August. The threat of another round of tariffs has rattled investors, just as market confidence was picking up.
China will have to think creatively when it hits back against America’s tariffs.
Beijing cannot simply simply slap a reciprocal 10% tariffs on $200bn US goods, because it actually only imported $150bn of goods from America last year.
should China retaliate with the $200b number then its kinda over right pic.twitter.com/mjEgt3RfwY
so tariffs “applied” to roughly half of US imports from China pic.twitter.com/f6ihDL9VpH
America could suffer economic damage if these new tariffs are imposed in September, says Cailin Birch, global analyst at the Economist Intelligence Unit.
The proposed list of $200bn worth of goods includes a number of industrial inputs and components that would squeeze US companies’ supply chains and ultimately raise consumer prices.
And this, at a time when US exporters (particularly of agricultural products and manufactured goods including clothing and machinery) will be suffering from weaker external competitiveness, as a result of the tariffs imposed by China–as well as the by EU, Canada and Mexico, as part of a related dispute.
Russ Mould, investment director at stock brokers AJ Bell, says investors are scrambling to put their money into safe assets toda:
“Plans by the US for an additional $200bn of tariffs on Chinese goods has caused investors to lose their appetite for risk and seek solace in more defensive sectors such as consumer goods and utilities.”
European stock markets are not a pretty picture this morning, as trade war worries hit stocks.
In London the FTSE 100 is now down by 105 points, or 1.3%. The Stoxx 600, which tracks the biggest companies in Europe, is down 1%.
Things were going so well.
After four days of straight increases in US stock markets, mainly prompted by the looming earnings season which is expected to show a very respectable growth of about 20% this quarter for the S&P 500, stock markets in Asia, Europe, the US and most of the major commodities were plunged into red this morning, courtesy of the latest US trade tariff decision….
America is now conducting a two-month consultation on these proposed tariffs, meaning they could be imposed in September.
Paul Donovan of UBS points out that tariffs are actually an additional sales tax, as they make imports more expensive. He says:
President Trump once again prepared to lower the yoke of additional taxation onto the shoulders of US consumers.
Commodity prices are being hit hard today, with zinc dropping by 6% in Shanghai and copper down around 3.5%.
Traders are worried that these new tariffs will dent demand for metals, especially if Chinese growth is hit.
absolute commodity bonfire in China post tariffs: Nickel -2.4%, Copper -3.5%, Zinc -6% (limit down!) pic.twitter.com/0v9LNiNnMA
The list of Chinese goods facing new 10% tariffs at the US border is long and varied.
Our Beijing correspondent, Lily Kuo, reports that China has heavily criticised America’s move.
In Beijing, Li Chenggang, assistant minister at the ministry, said at a forum in Beijing that the latest US proposals interfered with the globalisation of the world economy and that China’s support for a multilateral trade system would not change.
An English-language editorial in the state-run China Daily that has now been taken down said, without mentioning the new tariffs. “China has no option but to fight fire with fire. It has to resolutely fight back while taking proper measures to help minimise the cost to domestic enterprises and further open up its economy to global investors.”
Duncan Innes-Ker of the Economist Intelligence Unit points out that America is now targeting low-value manufacturing goods.
This could drive production out of China, perhaps to Vietnam and Mexico.
The new tariffs being discussed by US on US$200bn of Chinese imports move beyond Made in China tech goods to areas like furniture and car parts. These are the heart of Chinese low-end export manufacturing – and big job creators. https://t.co/TFdyFIz2Sb
Worth remembering that these tariffs would likely only come in from mid-September. But once in, even at just 10%, they could have a significant impact in shifting low-value export manufacturing out of China.
Big beneficiaries of 10% tariffs on US$200bn of US imports from China would likely be Vietnam and Mexico. Rest of SE Asia and India could also see increased exports to US as a result.
America’s new planned tariffs could have a serious impact on China’s factories.
China exports around $500bn of goods to the US each year. If these latest tariffs go through, then around half those goods will arrive with additional levies slapped on them.
“Given the magnitude and breadth of the tariff list, the impact is expected to ripple through supply chains and cause collateral damage on regional economies”.
Britain’s FTSE 100 index has fallen 60 points, or 0.8%, to 7630 in early trading.
Other European markets are also in the red, as trade war fears ripple across the trading floors again.
The Chinese stock market slumped by over 2% after America announced it was targeting another $200bn of imports.
The CSI 300 shed 77 points to 3,390, back towards the 18-month low struck last week.
This new $200 billion salvo would be a considerable step up in the trade spat between the world’s strongest economies and the odds of this dispute taking a toll on global growth are now mounting.
The European and US futures are reflecting investors’ nervousness and the gains seen this week are now under threat
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
For more than a year, the Trump administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition.
We have been very clear and detailed regarding the specific changes China should undertake. Unfortunately, China has not changed its behaviour — behaviour that puts the future of the US economy at risk.”
#FTSE100 called -40pts at 7650 as Asian bourses fall on news that Trump has threatened China with another $200bn in tariffs and Beijing has pledged to retaliate, escalating the trade war story pic.twitter.com/xJwuNd6nIq