/Wall Street shares sink after China announces retaliatory tariffs

Wall Street shares sink after China announces retaliatory tariffs

Updated

May 14, 2019 07:56:15

Global markets tumbled — with Wall Street suffering its worst day since early January — after China said it will impose further tariffs on United States imports, escalating their ongoing trade war.

Market snapshot at 7:50am (AEST):

  • ASX SPI futures -0.9pc at 6,243, ASX 200 (Monday’s close) -0.2pc at 6,298
  • AUD: 69.43 US cents, 53.56 British pence, 61.85 euro cents, 75.85 Japanese yen, $NZ1.06
  • US: Dow Jones -2.4pc at 25,325, S&P 500 -2.4pc at 2,812, Nasdaq -3.4pc at 7,647
  • Europe: FTSE 100 -0.6pc at 7,164, DAX -1.5pc 11,877, CAC -1.2pc at 5,263, Euro Stoxx 50 -1.2pc at 3,321
  • Commodities: Brent crude -1pc at $US69.92/barrel, spot gold +1.1pc at $US1,299.66/ounce

The sell-off was sparked by fears that the world’s two largest economies are spiralling into a no-holds-barred dispute that could derail the global economy.

The finance ministry of China said it would set import tariffs — ranging from 5 to 25 per cent — on $US60 billion worth of US goods including frozen vegetables and liquefied natural gas, which will take effect on June 1.

“China’s adjustment on additional tariffs is a response to US unilateralism and protectionism,” the ministry said.

“China hopes the US will get back to the right track of bilateral trade and economic consultations and meet with China halfway.”

Beijing announced its new tariffs shortly after US President Donald Trump warned it not to retaliate.

The Trump administration, on Friday, raised tariffs on $US200 billion worth of Chinese goods, while US and Chinese negotiators were discussing a trade deal in Washington.

Mr Trump also ordered his trade chief to begin the process of imposing tariffs on all remaining imports from China.

Worst day since early January

The Dow Jones Industrial Average fell by a steep 617 points, down 2.4 per cent to 25,325. The industrial-skewed index has lost about 1,200 points over the last week, since US President Donald Trump announced his threat of further tariffs against China’s imports.

The benchmark S&P 500 closed 2.4 per cent lower at 2,812.

The tech-heavy Nasdaq index, however, was the hardest hit — dropping 3.4 per cent to 7,647.

Investors sought safety in safe-haven assets — US bonds, spot gold and the Japanese yen — while the US dollar slipped against a basket of currencies.

Spot gold added 1.1 per cent to $US1,299.72 an ounce.

“It’s clear that there is a lot of nervousness around the US-China trade negotiations and concern that it’s really deteriorating pretty significantly and that’s impacting all areas of markets,” said Kristina Hooper, chief global market strategist at Invesco.

Threatening the existence of WTO

On Monday (local time), China further warned that US policies were threatening the existence of the World Trade Organization, setting out a string of grievances in a WTO “reform proposal” published by the WTO on its website.

China did not name the United States in the document, but referred to the block on appointment of WTO appeals judges and “national security” tariffs on aluminium, steel and cars, policies uniquely associated with Washington.

Meanwhile, Mr Trump told China not to intensify the trade dispute and urged its leaders, including President Xi Jinping, to continue to work to reach a deal.

“China should not retaliate — will only get worse,” he said on Twitter.

“I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries,” Mr Trump wrote.

The US president, who has embraced protectionism as part of an “America First” agenda, stepped up his verbal attacks on China on Friday after two days of high-level trade talks in Washington ended with the two sides at an apparent stalemate.

ABC/Reuters

Topics:

trade,

business-economics-and-finance,

agreements-and-treaties,

world-politics,

donald-trump,

china,

united-states

First posted

May 14, 2019 05:41:18