All the day’s economic and financial news, as China accuses president Trump of poisoning trade talks with his latest salvo of tariffs
- Latest: China pledges to retaliate
- Introduction: Trump slaps $200bn tariffs on China
- The list of new tariffs
- Jack Ma: Trade war could last 20 years
Larry Hatheway, chief economist at asset manager GAM, believes investors aren’t taking the trade war seriously enough.
Having seen markets rise in Asia and Europe today, Hatheway warns that the situation could deteriorate sharply, hurting the global economy.
“Without question, tariffs are economically counterproductive and create inefficiencies in supply chains, location of production and add costs to firms and consumers. Criticism of the new tariffs from key US business and consumer groups was immediate. Investors may also be hoping that the US mid-term election outcome might temper the Trump Administration’s willingness to escalate trade tensions.
“But risks remain. One is the unclear rhetoric from the US Trump Administration, which has put forward a variety of explanations for tariffs (elimination of bilateral trade deficits, measures to counter intellectual property right infringement, objections to China’s investment in new technologies, etc). That makes it difficult to know what the basis for an agreement to diffuse the situation might look like.
Europe’s trade commissioner, Cecilia Malmström, has criticised Donald Trump’s new tariffs, telling reporters (in Brussels, I think) that they are “very unfortunate”.
She also disputed Trump’s claim earlier this year that trade wars are ‘good and easy to win’ (if you’re running a big trade deficit)
This escalation is very unfortunate”, Cecilia Malmstrom, the EU’s trade commissioner, told reporters.
“Trade wars are not good and they are not easy to win”….
EU trade chief Malmstrom criticises US tariffs on China https://t.co/7shSCYVWlR
Companies are starting to scramble to protect themselves from trade war damage, says Chris Towner, director at JCRA, a financial risk management consultancy.
We are certainly seeing an increase in firms looking to review their foreign exchange exposures and put together hedging strategies to help them cope with the volatility.
In reaction to the trade disputes and follow-up actions, we have seen the Chinese yuan weaken by almost 10% against the US dollar, since the outset of this year. This will act as a buffer for Chinese exporters dealing in the international markets.
Asian stock markets ended the day on a strong note, despite the latest trade war escalation.
The renewed appetite for risky assets suggests that investors are getting tired of this situation and are paying less and less attention to Donald Trump’s tweets and public comments.
ABN Amro on US-China tariffs:
– 10% import tariff is not really prohibitive
– Given regular FX fluctuations, input prices and flexibility for both importers and exporters to adjust margins somewhat, a 10% import tariff might not have a strong impact on bilateral trade flows
Donald Trump’s trade war has already impacted on 2.5% of world trade, says Timme Spakman, economist at Dutch bank ING.
And it could get worse, if the White House follows through on its threats to impose even more tariffs on China.
As President Trump pulled the trigger on 10% additional tariffs on imports from China last night, the percentage of world trade affected by it all just went up to 2.5%. If the US acts on further tariff threats, this could go up to 4%
The new measures will cover USD 200bn worth of US imports from China, including jet engines, electronics, and fish.
Newsflash: Jack Ma, the founder of Chinese e-commerce giant Alibaba, has warned that the US-China trade war could rumble on for decades.
Jack Ma on the China US trade war:” it will last for a long while. It may last 20 years. Even when Donald Trump retires, the new president will continue. This is about big power rivalry. One thing for sure is the world needs a new set of trade rules and orders.” pic.twitter.com/OQ2YER2w3C
Alibaba’s Jack Ma warns that the U.S.-China trade war could last 20 years
The full list of Chinese products that will hit with an extra 10% tariff next week (rising to 25% eventually) is online here.
Apple’s smart watch, wireless headphones, and smart speaker will not be affected by the Trump administration’s latest tariffs on Chinese imports, according to a list of affected products listed on Monday.
Some Apple products, including its MacMini, will still be affected.
Bloomberg has estimated that the trade war will knock around half a percentage point off China’s growth rate this year.
The impact could rise to almost one percentage point, though, once these latest tariffs rise from 10% to 25% in 2019.
#DailyDataPoint: Bloomberg Economics’ initial estimate is that tariffs will take 0.5 percentage point off China’s GDP growth, and the cost will be around 0.9 percentage point a year when the 25% tariff on the latest round of goods takes effect https://t.co/lP6VlfibYb pic.twitter.com/ExseO6VBHx
Paul Donovan of UBS Wealth Management has a good take on the US tariffs:
Reminder: China can’t simply retaliate by slapping a 10% tariff on $200bn of US goods, because it only buys around $130bn of stuff from America each year.
And it already has new tariffs on £50bn-worth of those imports, meaning Beijing only has $80bn of firepower left.
There’s a flurry of activity in Beijing right now.
The foreign ministry is giving a briefing on trade, and accusing the US of not being sincere.
Newsflash: China has announced it will retaliate against America’s new tariffs….without saying how.
The Chinese commerce ministry says it has no choice but to respond to the new 10% tariff on thousands of goods entering the US.
– China to levy retaliatory tariffs simultaneously with the US
– China says it is “forced to retaliate”, new US tariffs bring uncertainty to trade talks
While the UK continues to scratch its head over its relationship with Europe, there is a full scale trade war underway between the world’s two biggest economies https://t.co/B4y9hExwNW
America’s Information Technology Industry Council (ITI), which represents major tech firms, was quick to criticise these new tariffs.
China must change, but this is not the way to achieve the needed market access in China. More tariffs not only punish American consumers, manufacturers, and businesses of all sizes, they will also diminish the opportunity to negotiate with the Chinese and address longstanding trade issues.
If implemented, these tariffs will have both short- and long-term effects on the United States – from increased prices at the checkout counter to decreased leadership on the emerging technologies that will shape our future.”
Elsa Lignos of RBC Capital Markets believes Americans will soon feel the impact of Trump’s tariffs in the shops:
Market reaction was muted as the tariffs had been widely telegraphed (and some cling to hope that the delay of 25% tariffs until January will mean more time for negotiation and reconciliation post midterms – an idea we think is unlikely).
We have now reached a level of affected imports where it will necessarily start to impact consumer prices.
The oil price, which is often a good barometer for growth prospects, has dipped since the US tariffs were announced.
The growing trade dispute has hurt trading sentiment. The impact on economic growth is slowly dripping in, which again hurts oil prices,”
Somewhat surprisingly, China’s stock market has actually risen since Donald Trump escalated the trade war.
The benchmark Shanghai composite index has jumped by 1.7% today, having slumped to a four-year low on Monday.
Shanghai Composite +1.6% the day after new tariffs announced, because why not eh pic.twitter.com/ScDmfoXKEY
A senior Chinese regulator has accused Donald Trump of creating a toxic atmosphere that could undermine efforts to reach a trade pact.
Fang Xinghai, vice chairman of China’s securities regulator, also claimed that China wouldn’t cave in to these latest tariffs.
“President Trump is a hard-hitting businessman, and he tries to put pressure on China so he can get concessions from our negotiations. I think that kind of tactic is not going to work with China.”
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
“For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies. We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly.
But, so far, China has been unwilling to change its practices.”
“I urge China’s leaders to take swift action to end their country’s unfair trade practices. Hopefully, this trade situation will be resolved, in the end, by myself and President Xi of China, for whom I have great respect and affection.”
#FTSE100 Index called to open -35pts at 7265 after Trump imposes tariffs an another $200bn of China imports, weakening USD but keeping GBP strong; dual-listed
Miners mixed downunder o’night pic.twitter.com/1FLkbslirS