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23 March 2018
 |
| China financial markets (The Total Investment & Insurance
Solutions) |
Fears of a trade war are roiling financial markets Friday, with
stocks under pressure around the world and the dollar in retreat.
A day after the Trump administration imposed tariff hikes on Chinese
goods, Beijing has threatened import duties on U.S. goods including pork,
apples and steel pipes, accentuating fears of a global trade war.
"For a person who's been obsessed with stock market gains since his
election victory 16 months ago, President Donald Trump doesn't appear too
concerned about the impact his tariffs are having at the moment," said
Craig Erlam, senior market analyst at OANDA.
Though the European Union has been granted a possible exemption, stock
markets across the region have fallen sharply. In early afternoon trading,
Germany's DAX was down 1.7 percent at 11,900 while the FTSE 100 index of
British shares fell 0.6 percent to 6,910. France's CAC-40 was 1.5 percent lower
at 5,089.
In Asia, markets ended sharply lower after a stomach-churning ride. Japan's
benchmark Nikkei 225 index plunged 4.5 percent to 20,617.86, its second-biggest
daily decline in a year, and South Korea's Kospi tumbled 3.2 percent to
2,416.76. Hong Kong's Hang Seng lost 2.5 percent to 30,309.29 and the Shanghai
Composite in mainland China sank 3.4 percent to 3,152.76. Australia's
S&P/ASX 200 skidded 2 percent to 5,820.70.
A day after the Dow Jones industrial average dropped more than 700
points, Wall Street was poised for a steadier session. Dow futures and the
broader S&P 500 futures were down a modest 0.2 percent.
Trump is planning to impose tariffs of 25 percent on imported steel and
10 percent on aluminum. The move is aimed at China, which has been flooding the
world with cheap steel and aluminum, but would hurt many other countries,
including close allies like the European Union. Trump's administration gave
some countries, including the EU, Canada and Mexico, an exemption until May 1,
pending negotiations.
EU Trade chief Cecilia Malmstrom said the plans for steel and aluminum tariffs
"are a highly unfortunate unilateral action, which goes against agreed
international rules."
In a separate case, the Trump administration approved a possible tariff
hike on Chinese imports worth up to $60 billion over its complaint that Beijing
steals or forces foreign companies to hand over technology.
China gave no indication of a possible response but a foreign ministry
spokeswoman said Beijing was "fully prepared to defend" its
interests.
"Everybody's pushing each other around to do some negotiating,"
said David Collins, chief operations officer at CMC China Manufacturing
Consultants, which advises companies on setting up factories in China.
"Trump is negotiating. He's pushing back on the Chinese, and the Chinese
will push back."
On Thursday, investors fled stocks and bought bonds, which sent bond
prices higher and yields lower. With interest rates falling, banks took some of
the worst losses. Technology and industrial companies, basic materials makers
and health care companies also fell sharply.
Peter Donisanu, an investment strategy analyst for the Wells Fargo
Investment Institute, said the risk of a damaging trade war is still low
because the Trump administration is targeting specific goods that aren't
central to China's economy. That could change if it puts tariffs on products
like electronics or appliances imported from China.
"If the Trump administration really wanted to hurt China and start
a trade war, then they would go after those larger sectors," he said.
The risk of a U.S-China trade war is a regional concern, given the
myriad supply chains and other ties across Asia. For example, South Korea's
largest trading partner is China. The U.S. is its second biggest.
"I'm worried that it would affect the national economy," said
S. E. Kim, an employee at a construction company in Seoul. "If the U.S.
imposes tariffs on China like that, I think there would be some damage on us in
the long term as well."
The dollar has suffered on concerns over a possible trade war. The euro
was up 0.4 percent at $1.2345 while the dollar fell 0.2 percent at 105.08 yen.The Total Investment & Insurance
Solutions
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