Donald Trump’s latest threat to impose tariffs on all Chinese imports sent Asian markets tumbling Monday on growing fears of an all-out trade war between the world’s top two economies. The president’s comments Friday added to the uncertainty on trading floors, which have also been hit by concerns of a brewing financial crisis in emerging markets.
They also overshadowed data showing a bigger-than-forecast jump in US jobs creation for August and sent all three main indexes on Wall Street into negative territory. There was some relief earlier Friday that Trump did not immediately impose levies on $200 billion of Chinese goods after the passing of a deadline for a public consultation.
The greenback has already rallied against a number of emerging markets units with India’s rupee at record lows and the Indonesian rupiah at a 20-year trough on fears that economic crises in Argentina, South Africa, and Turkey could spread globally.
The threatened tariffs would add to the $50 billion in imports already targeted and mark a major step up in the long-running battle between the world’s top two economies. However, Trump told reporters on Air Force One later that day that “there’s another $267 billion ready to go on short notice if I want”.
That would cover virtually all the goods the United States imports China. Beijing has threatened to retaliate against any measures out of Washington. “Markets had some hope that as we got to that deadline there would be some concessions, but there’s really escalation,” Sean Fenton, director at Tribeca Investment Partners, told Bloomberg Television.
China Surplus Balloons
There is also nervousness that talks between the US and Canada on a revised North American Free Trade Agreement had still not wrapped up. Hong Kong stocks suffered the sharpest losses, falling 1.3 percent in the morning, while Shanghai slipped 0.8 percent with the news that China’s surplus with the US hit a record in August adding to concerns Trump will push ahead with the tariffs.
“Chinese trade data and a ballooning record surplus with the US over the weekend won’t have helped. Time to be a little more realistic about this trade war and a little less sanguine methinks,” said Greg McKenna chief market strategist at AxiTrader. Sydney lost 0.1 percent, Singapore slipped 0.4 percent and Taipei shed 1.2 percent. Manila and Jakarta were also sharply lower.
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But Tokyo ended the morning marginally higher. On currency markets the strong US jobs report added to expectations the Federal Reserve will hike interest rates at least two more times this year, putting further upward pressure on the dollar. The greenback has already rallied against a number of emerging markets units with India’s rupee at record lows and the Indonesian rupiah at a 20-year trough on fears that economic crises in Argentina, South Africa, and Turkey could spread globally.
Key Figures Around 0230 GMT
Tokyo – Nikkei 225: FLAT at 22,314.36 (break)
Hong Kong – Hang Seng: DOWN 1.3 percent at 26,618.32
Shanghai – Composite: DOWN 0.8 percent at 2681.14
Euro/dollar: DOWN at $1.1552 from $1.1560 at 2100 GMT
Pound/dollar: DOWN at $1.2920 from $1.2923
Dollar/yen: DOWN at 110.96 yen from 111.02 yen
Oil – West Texas Intermediate: UP 34 cents at $68.09 per barrel
Oil – Brent Crude: UP 43 cents at $77.26 per barrel
New York – Dow: DOWN 0.3 percent at 25,916.54 (close)
London – FTSE 100: DOWN 0.6 percent at 7,277.70 (close)
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