Financial markets have taken a shock after Donald Trump announces USD 60 billion of further tariffs on China, fears of escalating trade war between the world’s two biggest economies.
Trump told reporters that the US trade deficit with Beijing was out of control at about $504bn. “It is the largest deficit of any country in the history of our world. It’s out of control,” the US president said as he signed a memorandum. “We have a tremendous intellectual property theft situation going on, which likewise is hundreds of billions of dollars.”
Speaking at the White House, Donald Trump said the imposition of tariffs was part of an effort for fairness, noting that China imposes a 25% tariff on US cars while the US only has a 2.5% duty on Chinese cars. “They charge us, we charge the same thing,” said Trump.
US stock markets reacted negatively, with the Dow closing more than 700 points down on fears of a US trade war Caterpillar, 3M and Boeing – all with significant exposure to China – were among the biggest fallers.
Fears of a trade war between the two biggest economies in the world were also reflected in the bond market, with US 10-year treasury bonds posting their biggest one-day drop in yields since September. Bank and tech stocks also fell. Facebook was down almost 3% on top of an 8.5% fall over the first three days of the week.
Trump’s move comes as the US prepares to impose tariffs of 25% on steel and 10% on aluminium, sanctions that are meant to hit China. The US trade representative, Robert Lighthizer, said on Thursday that Canada, Mexico, Europe, Australia, Argentina, Brazil and South Korea would for now be exempt.
China’s retaliation against the U.S. tariffs on steel and aluminum appeared restrained.
Targeting $3 billion of U.S. imports, China has drawn a list of 128 U.S. products that could be hit with tariffs if the two countries are unable to reach an agreement on trade issues, the ministry said.