US equity markets reeled after China announced that it would raise tariffs on $60bn worth of US goods, hitting back after the Trump administration pushed ahead with new punitive duties on Chinese goods last week.
Beijing said on Monday that it would raise tariffs on a list of almost 2,500 goods to between 10 per cent and 25 per cent starting on June 1.
“China’s adjustment of tariff-adding measures is a response to US unilateralism and trade protectionism,” China’s Ministry of Finance said in a statement.
The tariff increase announced by Beijing on Monday would hit a broad range of sectors in the US, from heavy manufacturing and industry to agriculture and household goods.
The sharp escalation in the trade battle further eroded hopes of a quick resolution to US-China discussions and sent US share prices lower. The S&P 500 and Dow Jones Industrial Average were both down more than 2 per cent by mid-morning in New York, and global equities were eyeing their worst day of 2019.
贸易战的这一急剧升级，进一步削弱了各方对于美中有望很快通过磋商解决分歧的期待，导致美国股价走低。截至纽约时间上午中段，标普500指数(S&P 500)和道琼斯工业平均指数(Dow Jones Industrial Average)的当日跌幅都超过2%，全球股市可能迎来2019年最糟糕的一天。
The technology sector was particularly hard hit, with the S&P 500 sector falling 3.9 per cent in morning trading in New York. The grouping includes Apple shares, which were 5.1 per cent lower, wiping more than $40bn from its market capitalisation. Boeing dropped 3 per cent after a Chinese media report that Beijing could reduce orders from the manufacturer.
Soyabean futures were at their lowest point in more than 10 years in Chicago, sliding 2.1 per cent to $7.805 a bushel, while cotton — another major US agricultural export to China — fell 4.3 per cent to 65.5 cents a pound.
Treasury yields slipped as investors sought the safety of government bonds, putting the yield on benchmark 10-year US government debt at its lowest level since late March, down 4.1 basis points to 2.4139 per cent.
The rising tensions also knocked China’s currency and emerging market currencies more broadly. The renminbi was down 0.9 per cent against the US dollar on offshore markets, having crossed the Rmb6.9 level for the first time this year. The MSCI index tracking EM currencies was down 0.7 per cent, putting it on course for its biggest fall of 2019.
For 2,493 items on Beijing’s list — the bulk of the goods hit with the measures — tariffs would be increased by 25 per cent. Those included agricultural items, such as frozen spinach and natural honey, and compounds such as potassium sulphate, commonly used in fertiliser, as well as various manufactured products such as LED lightbulbs.
On two other lists of 1,078 and 974 items, tariffs would be raised by 20 per cent and 10 per cent, respectively. Those lists included many household goods such as toothpaste and bleach along with many types of apparel and related manufacturing equipment, such as men’s swimming outfits and machinery that makes shoes.
A smaller list of 595 items would not see an increase beyond the present level of 5 per cent. Among those items were a number of chemicals and industrial materials such as formaldehyde and lithium. A range of electronic and motorised devices such as starters for the engines of cars, planes and boats, and 3D printers would also be spared an increase.
The response from Beijing came just three days after the Trump administration more than doubled levies on $200bn of Chinese goods to 25 per cent. The US has threatened to hit a further $300bn of Chinese imports with the 25 per cent tariff rate if there is no progress in trade negotiations.
In response, China’s finance ministry said on Monday the tariff increase by the US “violates” an agreement between the two countries to resolve their trade differences through talks.
“In order to defend the multilateral trading system and defend its legitimate rights and interests, China has to adjust tariffs on some imported goods originating in the United States,” it added.
The White House and US trade representative did not immediately respond to requests for comment regarding China’s retaliation.
It was not the first time that China has said it would increase tariffs on the list of US goods. Last year, while facing earlier threats from the Trump administration, China said it planned to raise tariffs on $60bn in US exports to China. Some experts expected China to push forward with the threat should it be hit with a new wave of tariffs from the US.
Earlier on Monday, President Donald Trump warned Beijing not to retaliate against the rise in tariffs his administration implemented last week and said China would be “hurt very badly” if it did not agree to a trade deal.
Kristina Hooper, chief global market strategist for Invesco, said the increasingly dovish stance central banks led by the US Federal Reserve have taken this year after the dramatic drop in US stocks in December will cushion the fall for stocks.
景顺(Invesco)首席全球市场策略师克里斯蒂娜•胡珀(Kristina Hooper)表示，在去年12月美国股市大幅下挫后，今年以来以美联储(Federal Reserve)为首的各大央行采取日益鸽派的货币政策立场，这将缓冲股市下跌。
“The two biggest risks facing markets right now are a trade war and a central banking mis-step to tighten too much. We have one of those risks out of the way, so that will limit the sell-off for stocks,” Ms Hooper said.