Tuesday, 02 June, 2020

Global stock markets plunge after China responds in kind to U.S. tariffs

Trump says China is ‘DREAMING’ of a Sleepy Joe Biden presidency Enlarge Image AP
Ginger Lawrence | 14 May, 2019, 13:57

On the supply side of the oil markets equation, Saudi Arabia, Russia and other major producers, with memories still fresh from the cataclysmic drop in oil prices from more than $100 per barrel in mid-2014 to dropping below the $30 price point in January 2016, can be expected to withhold as much production as possible to keep prices from plunging too low.

Hong Kong's Hang Seng Index was down 1.6 percent on Tuesday afternoon. The S&P 500 lost 1.67 per cent by mid-morning.

"There can be some retaliation, but it can't be very substantial", Trump told reporters Monday at the White House during a meeting with Hungarian Prime Minister Viktor Orban.

The result has been a volatile week-long roller coaster with no end in sight.

According to data released by Australia's Department of Foreign Affairs and Trade (DFAT), the value of bilateral trade with China stood at $A194.62 billion in the 2017/18 financial year, near-triple second-placed Japan at $A77.6 billion.

Last Thursday morning the Dow skidded 580 points, only to regain almost 470 by close of trading on Friday.

Trump on Monday warned Beijing not to go too far in responding to USA trade actions after China rolled out its retaliation to his move to hike import duties on a separate US$200 billion tranche of imports from China last week.

The US President's comment came after noting that Treasury Secretary Steven Mnuchin, who was attending the event, returned from trade talks in China two weeks ago. The Trump administration issued such assistance to farmers during a previous round of China's retaliatory tariff increases.

"I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don't make a deal because companies will be forced to leave China for other countries".

"So you absolutely can't put the hat on China of reversing positions and going back on one's promises", Geng said, adding China has shown goodwill in the talks and has kept its promises. "The U.S. -instigated trade war against China is just a hurdle in China's development process".

Washington Nationals at Los Angeles Dodgers Betting Preview
David Freese added a two-run homer in the seventh off reliever Matt Grace to give the Dodgers 39 home runs at home this season. The Dodgers also played without third baseman Justin Turner , who was given a day off against a right-handed pitcher.

Trump has said that US consumers will not shoulder the burden of tariffs, though experts say the increases are likely to affect consumers in both countries.

The president said Monday that that's not inevitable.

First, since Washington has chose to solve the trade issue with China through negotiation, it means a deal can be reached by talks between the two sides.

Aaron Klein, a fellow at the Brookings Institution who previously served as a Deputy Assistant Treasury Secretary during the Obama administration, explains that tariffs are essentially a "tax on US consumption of foreign goods". That brought the total of Chinese goods hit with the 25 percent tariff to $250 billion.

The Republican president suggested that businesses could avoid tariffs by increasing USA production.

"Many tariffed companies will be leaving China for Vietnam and other such countries in Asia".

Still, business groups and congressional Democrats are insisting that Trump, having taken U.S. "We have had unfair trading practices all these years and so in my judgment, the economic consequences are so small, but the possible improvement in trade and exports and open markets for the United States - this is worthwhile doing".

But Beijing appeared to dig in.

And the president has publicly complained about government subsidies that lower Chinese companies' operating costs, along with a sustained effort to devalue the Yuan, tactics that make Chinese products progressively cheaper to buy.

"Even if the dispute escalates, with Trump following through on his threat to extend the 25 percent tariff to all of China's imports, the impacts on US real GDP and inflation would still be modest", Capital Economics' senior USA economist Andrew Hunter said.