Published: Mon, May 06, 2019
Global News | By Blake Casey

Markets fall after Trump threatens to hike China tariffs

Markets fall after Trump threatens to hike China tariffs

Trump announced on Sunday that Washington would raise tariffs on a number of Chinese goods from 10 to 25 percent starting Friday, citing slow progress in trade talks.

On oil markets both main contracts were hammered more than two percent by worries that a trade war between the world's top two economies could hit demand for the commodity.

Trump said he is raising some tariffs because the trade talks are going "too slowly".

The Wall Street Journal reported earlier that China was considering cancelling this week's meetings in Washington in light of Trump's comments, which took Chinese officials by surprise. "I was disappointed that Larry Kudlow downgraded it to a mere warning, which may tend to undermine American credibility as the Chinese delegation prepares its position" ahead of this week's scheduled talks, he said. The analyst wrote that based on the firm's discussions with trade sources, there is "universal belief" that any potential agreement fell apart in recent days, despite an agreement being close to finished last week.

That has disrupted trade in goods from soybeans to medical equipment.

Last week, industry sources said they believed the talks were in the endgame and Mnuchin had said he hoped the U.S. negotiating team would soon be able to recommend a deal to Trump or tell him that one could not be reached.

In his tweets Sunday, Trump said the tariff increase will happen Friday. The future for the Dow Jones Industrial Average lost 1.5 percent while Tokyo's Nikkei 225 retreated 0.2 percent. The U.S. had been targeting May 10 to announce a deal, that would be finalized and signed by Trump and Chinese President Xi Jinping later at an official summit, people familiar with the negotiations said last week. That increase will now go into effect on Friday, Trump said in a tweet.

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The threat, conveyed via Twitter, dashed expectations that the two biggest economies might forge a deal in talks this week.

"The risk of an all-out U.S".

The US president originally imposed a 10 percent tariff on these goods in September that was due to rise in January, but postponed this as negotiations advanced. The Tariffs paid to the United States of America have had little impact on product cost, mostly borne by China.

"We see the weekend's developments as a negative catalyst for the market, not only because of where investor expectations have been regarding the deal, but because of the downward earnings revisions that are likely to occur if the tariffs are expanded, " said Lori Calvasina, head of USA equity strategy at RBC Capital, in a note to clients. USA stocks were also headed for a lower opening with Dow futures and the broader S&P 500 futures both down 2 per cent. He also said he would impose tariffs on $325 billion worth of products from China, accounting for all of its exports.

China has retaliated with $110bn-worth of tariffs on United States goods, including agricultural produce such as soya beans, as well as cars, luggage, electronics, housewares and food.

The Australian dollar also took a big hit from the tariff fears, falling to 69.7 U.S. cents.

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