Published: Mon, May 13, 2019
Markets | By Otis Pena

Stocks tumble around world as U.S.-China trade deadline approaches

Stocks tumble around world as U.S.-China trade deadline approaches

US President Donald Trump has said he will raise tariffs on $200 billion of Chinese goods on Friday with his officials accusing China of reneging on promises.

Punitive duties on a vast array of Chinese-made goods, from electrical equipment to machinery to seafood to furniture, will jump to 25 percent at midnight Thursday (0400 GMT Friday).

In a statement issues Wednesday evening, the National Council of Textile Organizations (NCTO) said it "appreciates the Trump administration's action to crack down on unfair trade practices from China through the Section 301 mechanism, and the organization", and that it "urges the administration to ensure an expeditious and transparent exclusion process and the inclusion of finished apparel and textile end products to this remedy". Consumer products, including cell phones, computers, clothing and toys, would be especially hard hit.

Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin talked for 90 minutes on Thursday and were expected to resume talks on Friday. Because they broke the deal! We can't have that.

Even though Mr Trump has downplayed the impact of tariffs on the USA economy, the rise is likely to affect some American companies and consumers as firms may pass on some of the cost, analysts said. The United States and China have already raised tariffs on tens of billions of dollars of each other's goods in their dispute over U.S. complaints about Beijing's industrial and technology policies and a perennial USA deficit in trade with China.

Beijing appealed earlier yesterday to Washington to meet it halfway to salvage a deal.

Gao said the decision to send the delegation led by Vice Premier Liu He to Washington despite the tariff threat demonstrated China's "utmost sincerity". Stocks are opening broadly lower on Wall Street as investors keep a close eye on trade talks between the USA and China.

So far, the USA has collected $34.7 billion through the first six months of this fiscal year, according to the most recent monthly statement of revenues and outlays issued by the Treasury Department.

"China is not afraid of conflict", said the Global Times, a newspaper published by the ruling Communist Party's People's Daily that is known for its nationalist tone.

Some believe that increasing tariffs will decrease the demand for products and increase the overall costs because companies will have to pay tariffs if they want to import from China.

"This creates an unofficial window, potentially lasting a couple of weeks, in which negotiations can continue and generates a "soft" deadline to reach a deal", Goldman Sachs said in a report Thursday.

Volkswagen Unveil ID 3
Volkswagen has taken a page out of Tesla's book, and thrown open reservations on the new VW ID.3 all-electric city vehicle . Volkswagen said production is expected to begin at the end of 2019, with deliveries starting in Europe around mid-2020.


Talks stalled last week reportedly because the Chinese side opted for regulatory rather than legislative implementation, which could be internally undone more easily.

"The Chinese side deeply regrets that if the USA tariff measures are implemented, China will have to take necessary countermeasures".

Markor Furnishings of Urumqi told securities regulators Monday that it had bought a U.S. sofa manufacturer and a Vietnamese wood furniture maker past year to dodge Trump's tariffs. U.S. Treasury yields fell as investors sought safe havens and the dollar was down against Japan's yen, though it regained some ground.

At present, the administration imposes tariffs on $250 billion in imports from China, in response to alleged intellectual property and technology theft by Chinese companies.

The stripping of binding legal language from the draft struck directly at Lighthizer's highest priority.

In April, Chinese exports to the USA plunged 13% compared with a year ago, and are down 9.7% since the start of 2019.

President Donald Trump tweeted Wednesday that Liu still wanted to "make a deal", but the United States leader boasted about tariffs that were "not good for China". Now he's publicly playing hardball with the world's second largest economy by threatening new tariffs that will kick in Friday, as if striking a unilateral deal is all the American worker needs in the years ahead.

The proposed United States measures were due to come into force around 5pm (NZT) on Friday and will see rates on a vast array of Chinese-made electrics, machinery, vehicle parts and furniture jump from 10 percent to 25 percent.

In any case, China has threatened to retaliate if the US moves forward with its tariff increase. Tariffs can put us all at serious risk of a global recession due to tighter financial conditions and weaker global growth.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc.

Like this: