Markets Tumble Over Fears of a U.S.-China Trade War

09 May, 2019, 04:26 | Author: Gerard Cortez
  • World shares mixed as China affirms trade talks to go ahead

Sunday's (May 6th) comment came as a surprising move by United States president to mount pressure on China, since he had cited progress on trade talks as early as last Friday (May 3rd).

For weeks, the Trump administration had suggested that talks were making steady progress, and financial markets seemed to have priced in a peaceful resolution to the trade dispute.

I assume that Trump has examined both the political and economic implications of increasing tariffs on Chinese goods.

Trump's Sunday tweet was meant to rattle Beijing, and it came without extensive discussions among his economic team, officials said.

It's unclear whether the brinksmanship tactics from the Trump administration will help or hurt the prospects of a deal getting done quickly, something that investors want.

Another round of negotiations is slated to begin in Washington on Thursday.

The trade war between the USA and China - which seemed to be nearing an end - has suddenly escalated with the threat of new tariffs.

Separately, China's Commerce Ministry said it would respond in kind, adding that escalating trade frictions were not in the interest of either country or the world. The move came after China backtracked on virtually all of the major parts of a trade pact being negotiated with Washington, Reuters reported on Wednesday.

In the last two days, the Dow has tumbled by more than 540 points.

Mnuchin, who has been more open to a deal with improved market access, and at times clashed with Lighthizer, appeared in sync with Lighthizer in describing the changes to reporters on Monday, while still leaving open the possibility new tariffs could be averted with a deal. The mood had shifted dramatically, and their Chinese counterparts were now attempting to renegotiate significant aspects that United States officials already believed had been settled weeks before, leading to the belief that prospects for a deal were fading. The official disputed the assertion that China was backtracking on its promises, adding that US demands were becoming more "harsh" and the path to a deal more "narrow" as the negotiations drag on.

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President Donald Trump on Sunday threatened over Twitter to jack up tariffs on $200 billion in Chinese goods from 10 percent to 25 percent, as well as impose 25 percent levies on more than $300 billion in products imported from China.

The trade tensions have also rattled financial markets, jeopardising a USA stock market rally that Mr Trump sees as a vote of confidence in his economic policies.

"They have their internal politics, too", said Michael Pillsbury, director of the Hudson Institute's Centre on Chinese Strategy and an adviser to the Trump White House.

"We're not breaking off talks at this point".

China is Alabama's second largest trade partner. But behind the scenes, officials still aren't sure if Vice Premier Liu He will show up.

"The president, I think, is trying to get China's attention and get them back to the table", said Thune.

Chinese Vice Premier Liu He is expected to join a delegation in the United States this week. China wants them lifted; the USA wants to keep tariffs as leverage to pressure the Chinese to comply with any agreement.

"The market was just very complacent thinking a deal would happen", said Sandy Villere, portfolio manager at Villere & Co.

"You see the tariffs we're doing?" He stopped short of criticizing the president's plan to raise tariffs.



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