Asian stock markets slumped Friday after Beijing responded to the Trump administration's tariff hikes by saying it may order higher import duties on a range of US goods, ratcheting up fears of a trade war.
In response to President Donald Trump's tariff hike on steel and aluminum, China unveiled a list of US goods including pork, apples and steel pipe that it may hit with higher import duties. The new memorandum is expected to take a dig at few products in technology sector in which China has an advantage over the U.S. Peter Navarro, the Director of Trade said that the U.S.is "strategically defending itself against economic aggression".
Trump's China-US import tariffs are essentially created to punish China for the behaviour Trump's investigation is said to have discovered. That was in addition to the metals duties ordered earlier this month on China and other countries.
At 3:26 p.m. ET, the Dow Jones Industrial Average .dji fell 288.14 points, or 1.2 percent, to 23,669.75, the S&P 500 .spx lost 39.98 points, or 1.51 percent, to 2,603.71 and the Nasdaq Composite .ixic dropped 118.33 points, or 1.65 percent, to 7,048.35. The index skidded 6% this week, its worst since January 2016.
"The US declared a trade war, but China is acting quite restrained".
A statement from the Chinese commerce ministry said: "China doesn't hope to be in a trade war, but is not afraid of engaging in one".
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Included in China's 128-item hit list are steel products, ethanol, almonds, fresh and dried fruits, and ginseng. The USTR will announce the proposed list in the next "several days", according to the fact sheet. Threats and tariffs flew back and forth across the Atlantic.
If a trade war does erupt, both sides are likely to share the blame.
As he signed the tariffs order, Trump told reporters, "This is the first of many".
The market also considered economic reports released Friday.
With real fears of a potential trade war dampening investor sentiment, the tone among markets was downbeat. Meanwhile, business groups representing companies ranging from Walmart Inc.to Amazon.com Inc. are warning USA tariffs could raise prices for consumers and sideswipe stock prices. Shen Dingli, deputy dean of the Institute of International Affairs at Shanghai's Fudan University, said the numbers announced so far were "actually quite small" compared to overall trade flows. The Bank of England warned Thursday that increased protectionism could have a "significant negative impact" on global growth.
- US Trade sanctions on Chinese imports will bring retaliatory measures.
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But in contrast to stock market ructions, the country's currency markets remained quiet, with analysts expecting that any Chinese response to USA trade actions is unlikely to include changes in its foreign exchange policy. "He has apparently miscalculated the situation and underestimated China's resolve and capability to defend its own legitimate rights and interests as well as the price the USA has to pay for its recklessness and willfulness", the spokeswoman noted. "Trump is negotiating. He's pushing back on the Chinese, and the Chinese will push back". However, they concede they're anxious about retaliation.
USA diplomats, business leaders and many experts, though, blame China for consistently failing to address long-standing demands to open its markets further.
But riling China has always been central to Trump's strategy as president.
"I view them as a friend". Chinese President Xi Jinping sent two high-level envoys to Washington last month, but neither managed to resolve the situation, he pointed out. For example, South Korea's largest trading partner is China.
Although the USTR was given 15 days by Trump to propose a list of Chinese products that will be targeted, China's commerce ministry has already threatened to take legal action against the United States through the World Trade Organization. "It has been very expensive for America", said Navarro. "We're doing things for this country that should have been done for many, many years".
White House officials said the actions came after years of efforts failed to convince China to change its behaviour.
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