Economy

Escalating Trade War Sends Stocks Reeling

Escalating Trade War Sends Stocks Reeling

"President Trump is fixated with tariffs, which he believes he can wield freely; but there are grave consequences", said American Apparel & Footwear Association president Rick Helfenbein. In a forcefully worded statement, it said Beijing is ready to "defend the interests of the Chinese people and enterprises".

"Just about every major information and communication technology product was exempted", one US industry told Reuters.

It gave no details.

President Trump late on Monday threatened to impose a 10 percent tariff on $200 billion of Chinese goods, escalating a tit-for-tat trade war with Beijing.

Asian stock markets fell following Trump's announcement. S&P 500 e-minis (ESc1) were down 30.75 points, or 1.11 percent and Nasdaq 100 e-minis (NQc1) were down 94.75 points, or 1.3 percent.

Turbulence is "mostly driven by sentiment", he said, adding that China has "room to face all sorts of trade friction".

Trump added: "These tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced". A June monthly survey of 272 US business leaders by Chief Executive magazine found growing fear about global conflict on trade matters.

As the markets slid, the White House made available one of the president's chief trade advisers to explain the latest moves and push back against critics.

Haibin Zhu, chief China economist at JPMorgan, estimates that United States tariffs on Chinese exports could slice between 0.1 and 0.5 percentage points off Chinese economic growth, depending on the scale and intensity of the tariffs.

"A lot of manufacturers built up capacity in other regions, primarily in Southeast Asia, basically so they could avoid importing cells and modules from China specifically", said MJ Shiao, head of Americas at GTM Research.

Chinese regulators also have the option of broadening their retaliation by tying up American companies in tax or anti-monopoly investigations or by denying or revoking licenses.

According to data from the U.S. International Trade Commission, the dollar value of imports of Chinese solar cells assembled into modules or panels has decreased 66.8 percent between 2017 and 2018 to-date.

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China's proposed tariffs on United States petroleum imports, part of a mounting trade war between the two countries, would crimp sales to the shale industry's largest customer, adding new pressure on U.S. crude prices, according to energy executives and analysts.

Economists warn Washington might be undercutting its negotiating position by alienating potential allies.

In March, 17 organizations from the fashion and soft-goods industries penned a joint letter reiterating that the US already imposes high border taxes on many consumer products.

The dollar index.DXY rose 0.31 percent, with the euro EUR= down 0.46 percent to $1.1569, though the euro trimmed some losses as France's and Germany's leaders agreed on a euro zone budget.

The "consumer pays more, not just more for imported cars, but domestic cars", said Michelle Casario, an assistant professor of economics at Villanova University.

The US has a huge surplus in aerospace trade with China, largely because of Boeing, the biggest US exporter.

"The tariffs to get common items back into Canada are so high that they have to smuggle them in", Mr. Trump told the National Federation of Independent Business on Tuesday.

On Friday, President Trump authorized tariffs on $50 billion of Chinese goods, such as industrial machinery.

Global stocks are showing signs of stemming Tuesday's selling, in which investors reacted to President Trump's threat to impose $200 billion of new tariffs on Chinese goods.

Europe, Japan and other trading partners raise similar complaints, but Trump has been unusually direct about challenging Beijing and threatening to disrupt such a large volume of exports.

Even before Mr Trump's latest salvo, some United States companies in China were feeling the pressure.