Published: Sun, July 15, 2018
Money | By Ethel Goodwin

Stocks slump, yen rises as United States raises stakes in trade conflict

Stocks slump, yen rises as United States raises stakes in trade conflict

President Donald Trump has said he may ultimately impose tariffs on more than $US500 billion worth of Chinese goods - roughly the total amount of USA imports from China past year.

Officials will hold hearings in late August on the list of targeted products and an administration official said it would take about two months to finalise, at which point Trump would decide whether to go ahead with the levies.

The latest shot in a spiralling trade conflict between the world's top two economies came just days after tit-for-tat tariffs on $34 billion in goods came into effect.

The eventual goal is to impose tariffs on 40 percent of Chinese imports, the same proportion of U.S. goods hit by Beijing's retaliation, an official told reporters.

U.S. President Donald Trump has accused China of unfair trade practices that give its firms an advantage, while hobbling American companies and creating an outsized trade deficit for the United States.

"I strongly urge President Trump and President Xi to meet soon face to face to craft a solution to establish fair and lasting trade between our two countries", Brady said in a statement.

China accused the U.S. of starting "the largest trade war in economic history", after the first round of tariffs took effect last week.

Trump has been following through on pledges he made during his presidential campaign to get tough on China, which he accuses of unfair trade practices, including theft of intellectual property and forced technology transfer, that have led to a $375 billion US trade deficit with China.

USA officials released a list of thousands of Chinese imports the administration wants to hit with the tariffs, including hundreds of food products as well as tobacco, chemicals, coal, steel and aluminium.

Market drops started in Asia overnight, with all of China and Hong Kong's share indexes losing more than 1%.

Some U.S. business groups and lawmakers from Trump's own Republican Party were critical of the escalating tariffs. And American consumers will have to pay the high price because U.S. firms will have to buy them despite the high tariffs.

Jack Ablin, chief investment officer for Cresset Wealth Advisors, said tariffs can have big effects: a tariff on an import from one country can lead to broad price increases for similar items, and rising taxes and costs might cause companies to change their supply lines in less efficient ways. There is no victor in a trade war.

The overall blow from Friday's tariff hikes to the world's second-largest economy should be limited, according to private sector analysts.

"It won't be hard for Chinese companies to find replacements for US goods", said Bai Ming, a researcher at the Chinese Academy of International Trade and Economic Cooperation, quoted by the newspaper Global Times.

For instance, a United States cherry producer told The Washington Post this week thata shipment to China was divertedfor further inspection and went bad, resulting in a loss for the United States firm.

Companies are watching USA chipmaker Qualcomm Inc., which has waited for months for Chinese regulators to decide whether to allow its proposed $44 billion acquisition of NXP Semiconductors.

Indexes in Europe and Asia took steeper losses as investors anxious the worsening trade dispute will hamper the growth of the global economy.

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