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Asian markets tumble as new tariffs threat ends calm
HONG KONG, July 11, 2018 (BSS/AFP) – The uneasy calm that had descended on
Asian markets was shattered Wednesday after the US threatened to hammer China
with tariffs on a further $200 billion of imports, ratcheting up a trade war
between the world’s top two economies.
Washington’s announcement comes just days after the two sides exchanged
tit-for-tat measures on a range of goods worth tens of billions of dollars,
with US Trade Representative Robert Lighthizer blaming Beijing.
“As a result of China’s retaliation (to Friday’s measures) and failure to
change its practices, the president has ordered USTR to begin the process of
imposing tariffs of 10 percent on an additional $200 billion of Chinese
imports,” he said in a statement.
Tuesday’s announcement is the latest move by Donald Trump in his America
First protectionist agenda that has also seen the US target Canada, the
European Union and Mexico, who have also hit back with their own measures,
sparking global trade war fears.
Trump has previously warned he would hit a total of $450 billion in
Chinese goods, which essentially accounts for all the country’s US-bound
exports, citing its unfair practices and intellectual property theft.
While observers have been nervously expecting the next salvo in the trade
row, the news jarred markets, which had enjoyed some stability this week from
upbeat US jobs data and hopes for the upcoming earnings season.
“This latest story will serve as a reality check for the market, reminding
investors to reconsider how aggressive they want to be,” Michael O’Rourke,
chief market strategist at JonesTrading, told Bloomberg News. “Regardless,
the $200 billion in potential additional tariffs is not a surprise. The
president made everyone well aware of them.”
The news sent risk assets into a nosedive. Tokyo’s Nikkei ended the
morning 1.4 percent lower, with exporters hurt as the safe-haven yen surged
against the dollar.
– ‘Sobering reality’ –
Hong Kong and Shanghai each lost 1.9 percent, while Seoul shed more than
one percent and Singapore gave away 1.5 percent. Sydney retreated 0.6
percent, while Taipei and Jakarta were also sharply lower.
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Stephen Innes, head of Asia-Pacific trade at OANDA, said “nothing is
written in stone and the tariffs are not set to take effect until September”
but the move was still “a very sobering reality check as to just how fragile
sentiment around trade war rhetoric is”.
But Ray Attrill, head of forex strategy at National Australia Bank, added
that he saw the move as “a negotiating tactic designed to get China back to
the negotiating table on trade”, adding that higher tariffs would “inevitably
impose significant burdens on US consumers”.
While the dollar slipped against the yen, the rush for safety saw the
greenback pile ahead against higher-yielding currencies, with the South
Korean won down 0.3 percent, Indonesian rupiah shedding 0.2 percent and Thai
baht 0.1 percent lower.
The Chinese yuan dived 0.6 percent, wiping out recent gains, with many
warning that Beijing stands to suffer most from a full-blown trade war, which
comes just as its economy shows signs of stuttering.
Observers will be keeping a close eye on the release Friday of Chinese
trade data, which will give an idea about how the row has affected the
country’s exports so far.
Oil prices also sank on concerns that a trade war could hit demand for the
commodity.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: DOWN 1.4 percent at 21,891.20 (break)
Hong Kong – Hang Seng: DOWN 1.9 percent at 28,131.96
Shanghai – Composite: 1.9 percent at 2,774.22
Dollar/yen: DOWN at 110.87 yen from 111.26 yen
Pound/dollar: DOWN at $1.3258 from $1.3279 at 2045 GMT
Euro/dollar: DOWN at $1.1725 from $1.1746
Oil – West Texas Intermediate: DOWN 65 cents at $73.46 per barrel
Oil – Brent Crude: DOWN $1.03 at $77.83 per barrel
New York – Dow: UP 0.6 percent at 24,919.66 (close)
London – FTSE 100: UP 0.1 percent at 7,692.04 (close)
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