US trade war: Dow recovers in early trading after China signals tariff retaliation – as it happened
The Dow Jones rose 0.5% in early trading on Wall Street, recovering some of the heavy losses a day earlier as investors digested US-China tit-for-tat measures
- Trump imposes tariffs on China
- European markets plunge as China reacts
- EU calls for permanent exemption from US tariffs
- Nikkei down 4% as investors fear damaging confrontation
2.52pm GMT
Before we close up for the day, here is a summary of the main developments:
2.48pm GMT
Time for another look at the markets.
In the US, the Dow Jones is bucking the trend across global markets and continues to rise.
2.05pm GMT
Brent crude oil prices have hit $70.03 a barrel, the highest since late January.
The rise follows comments from the Saudi energy minister, who said OPEC countries would need to keep co-ordinating supply cuts with non-member countries, including Russia, into 2019.
1.59pm GMT
Back to the subject of trade wars...
Ana Boata, senior economist at Euler Hermes, the trade credit insurer, has done some number crunching on what the dispute between the US and China might mean:
The trade feud between the US and China could lead to potential export losses of $15.7bn. The US' 25% tariff on imports for $60bn Chinese goods might cost China $15bn in export losses, while retaliatory Chinese tariffs on $3bn of US agrifood and steel products could see US exporters lose up to $700m.
We expect vehicles and electronics to be next on the target list, while their attentions might also turn to financial services and intellectual property.
1.37pm GMT
US markets are slightly up after the opening bell on Wall Street:
1.25pm GMT
Bank of England rate-setter Gertjan Vlieghe has put households on notice for borrowing costs to rise faster than previously thought over the next few years.
Using a speech in Birmingham, the member of the Bank's monetary policy committee said he saw a need for one or two rate hikes per year over the next few years, in comments likely to be seen as putting the Bank on track for raising the cost of borrowing in May.
1.18pm GMT
Andrew Hunter, US economist at Capital Economics, says the durable goods data suggests business investment is in "healthy shape".
The 3.1% rebound in durable goods orders in February was encouraging, even if that headline figure was boosted by the more volatile transport category. Equipment investment still appears to have slowed in the first quarter overall, but the data suggest that won't last for long.
The 26% in commercial aircraft orders was in line with the stronger orders reported by Boeing last month, while orders for defence aircraft also posted a big rebound. The 1.6% gain in motor vehicle orders was, however, stronger than expected given the recent declines in sales.
12.57pm GMT
On a data-light Friday, we've just had some stronger-than-expected numbers out of the US.
#UnitedStates Durable Goods Orders month-on-month at 3.1% https://t.co/G4gyxTou0U pic.twitter.com/xreKVSkHpH
12.37pm GMT
Joseph Stiglitz, the Nobel prize-winning economist, says China can't be seen to show weakness against a "bully" like President Trump.
He told Bloomberg Television in Beijing:
Particularly when you have a bully like Trump, it would not be good to respond in a weak way.
We know about appeasement from Munich. It's a different kind of a war but in a trade war, appeasement could lead to more and more demands.
[China is] sitting on $3 trillion of reserves that it can use to help those adversely affected. In the United States we don't have an economic framework that is able to respond to the particular places that will be affected by a trade war. The fiscal resources of the United States are strained.
China Can't Be Seen as Weak Against 'Bully' Trump, Stiglitz Says https://t.co/GMSKi92q29
12.12pm GMT
US futures have reversed earlier losses suggesting Wall Street could open slightly higher.
Dow Jones futures are up about 0.1% while S&P futures are up 0.2%.
12.09pm GMT
Trevor Greetham at investment company Royal London Asset Management says now could be the time to buy shares.
In a note titled "the Donald dip becomes a Trump slump", he says:
Stock markets have fallen back sharply towards their February lows. While the initial bout of market weakness this year was blamed on rising wage inflation and fears of higher interest rates, this time round it's in reaction to President Trump's announcement of a range of tariffs on imports from China.
Although equities have taken a battering since the market melt-up at the turn of the year when US corporate tax cuts were the focus, these moves aren't so unexpected. It's quite normal for markets to remain edgy for a month or two after such a sharp reversal and a move back towards the initial lows is not surprising.
11.50am GMT
Our delegation @EU_aluminium meeting Commissioner @MalmstromEU today on #Section232
Fruitful and constructive debate about the way forward. #Trade #aluminium pic.twitter.com/RxhaouJQIf
11.31am GMT
Cecilia Malmstrom, the EU's trade commissioner, has outlined her view on the bloc's temporary exemption from US tariffs in a series of tweets.
The exemption was agreed after Malmstrom travelled to Washington for talks with US trade representative Robert Lighthizer and commerce secretary Wilbur Ross.
...following discussions with @SecretaryRoss and @USTradeRep in Washington D.C. and Brussels. The EU is not the source of the global problems in the steel and aluminium sectors... 2/4
Preserving the global rules-based system for trade is what we should all be working towards. The EU will also keep our options open in terms of preserving our rights in the @WTO for further action. 4/4
11.08am GMT
Over in Brussels, where EU leaders are gathered for talks, positivity over the bloc's 40-day exemption on tariffs, granted by Washington, appears to be wearing thin.
Belgium's Prime Minister, Charles Michel, said he was not impressed at the suspension of tariffs until 1 May:
I have the impression that the US leader wants to negotiate with the European Union by putting a gun to our head.
That's a strange way to negotiate with an ally.
10.40am GMT
Here is our latest market roundup as China reacts to US steel tariffs:
Related: Global markets plunge as China reacts to Trump's steel tariffs
10.32am GMT
Peter Rosenstreich, a trader at Swissquote, the online bank, says markets are overreacting to "trade war hype":
Markets are overreacting to President Donald Trump's threats of a trade war. Trump is using the issue for political gain, rather than actual trade repositioning.
This will give him a nice bullet point for stump speeches in the 2020 campaign, but he gains little from sparking a full-blown trade conflict. Besides, the World Trade Organization is still in action.
10.24am GMT
Craig Erlam at online trading site Oanda, says investors are concerned that an impending trade war will derail the global economy:
For a person who's been obsessed with stock market gains since his election victory 16 months ago, US President Donald Trump doesn't appear too concerned about the impact his tariffs are having at the moment.
Trump may be prepared to add the European Union to the list of those that are temporarily exempt from the tariffs - with Canada, Mexico and Australia having been allowed similar exemptions - but that has barely cushioned the blow for investors.
10.05am GMT
Losses have widened across European market as investors digest the prospect of a US-China trade war.
Here are the latest scores:
9.46am GMT
Donald Tusk, President of the European Council, has called on the US to make permanent the EU's temporary exemption from steel and aluminium tariffs.
He says a good trading relationship between the US and EU is essential for "security and prosperity" in both regions:
EU calls for permanent exemption from US tariffs. #EUCO recalls commitment to strong transatlantic relations as a cornerstone of security, prosperity for US, EU and underlines support for dialogue on trade issues of common concern. #overcapacity https://t.co/5is7GKxyng
9.36am GMT
China's planned retaliation against US tariffs on steel imports includes a potential 25% levy on pork imported from the US.
In its initial counterstrike, China announced a 25 percent levy on US pork imports - a heavy blow to Iowa, the top pork-producing state and a political battleground that swung to Trump in 2016 after going for Democrat Barack Obama in the previous two elections.
Any hit to agricultural producers' earnings would be especially painful as falling commodity prices already are hurting rural America. US farm income is forecast to drop 6.7% this year to its lowest level since 2006, according to US department of agriculture estimates that assumed normal trade relations with China.
Trump country might be hardest hit by China's tariff retaliation https://t.co/mrIcG9dYdl pic.twitter.com/pN3r9RTbG6
9.06am GMT
EU leaders meeting in Brussels have welcomed President Trump's decision to row back on plans to impose tariffs on European steel.
Washington said on Thursday tariffs would be suspended for the EU - America's biggest trading partner - Argentina, Australia, Brazil, Canada, Mexico and South Korea. The tariffs are suspended until 1 May as discussions continue.
Europe has clearly stated its intention to riposte and enter a trade war ... it's a good thing that President Trump changed his mind on tariff increases.
I am very pleased that we have avoided a situation for the German steel and aluminium industry and its workers, that could have led to great uncertainty.
We don't want further unilateral measures, rather we want sensible agreements.
This is progress, let's keep talking.
8.49am GMT
Next is one of Britain's biggest retailers and the latest results for the year ending January 2018 reflect a tough trading backdrop on the UK's high streets.
In many ways 2017 was the most challenging year we have faced for 25 years. A difficult clothing market coincided with self-inflicted product ranging errors and omissions.
At the same time, the business has had to manage the costs, systems requirements and opportunities of an accelerating structural shift in spending from retail stores to online.
8.21am GMT
The FTSE 100 has fallen less than expected in early trading, currently down 33 points or 0.5% at 6,919.
The losses have been limited by GlaxoSmithKline and Next, which are the top two risers this morning:
8.04am GMT
And we're off... Europe's main markets have opened down, as predicted:
8.00am GMT
Tougher rules should be imposed on night flights and keeping costs down for passengers before parliament approves a third runway at Heathrow.
At present, the draft national policy statement does not guarantee that passengers will be protected from the cost risks associated with the scheme. The secretary of state must set out how airport charges will be held down.
Thousands of people across London could be exposed to worse levels of noise, air quality and traffic congestion - there must be sufficient measures to protect or compensate them.
Related: MPs demand tougher rules on night flights for Heathrow upgrade
7.38am GMT
European markets are expected to follow Asia lower when they open in about 20 minutes.
Here are the opening calls from traders at the spread-betting firm IG:
European Indices:#FTSE 6900 -0.76%#DAX 11945 -1.28%#CAC 5098 -1.34%#MIB 22151 -1.10%#IBEX 9380 -1.13%
7.30am GMT
Jasper Lawler at London Capital Group says the stand-off between the US and China is sending a chill through the markets:
Despite Trump claiming that the tariffs would make the US "a much stronger nation" the markets are keenly aware that there will be no winners in a trade war.
Worse still, the tit for tat responses that we are now seeing - and can expect to see more of - between the world's two largest economies, is damaging for their economies and the broader global economy.
7.13am GMT
Good morning if you're just joining us - and hello again if you've already been reading.
It's been a very busy day so far on the stock and currency markets so here's a roundup of what's happened:
Related: China promises to hit US with tariffs as stocks plunge amid fear of trade war
7.02am GMT
Spreadbetters are forecasting that the FTSE100 will lose about 0.8% when trading starts in London in an hour or so.
#FTSE100 Index called to open -70pts at 6890 pic.twitter.com/cu9OuMaxGv
6.50am GMT
The Kospi index in Seoul, South Korea has closed down 3.29%, or 82 points at 2,414.
The country has a large export industry and stands to lose out if there is a trade war between the US and China. It's largest trading partner is China and the US is its second biggest.
I'm worried that it would affect the national economy. If the US imposes tariffs on China like that, I think there would be some damage on us in the long term as well.
6.43am GMT
It's been a pretty rough few days on the financial markets. Facebook's woes are punishing the tech sector, the US Fed hiked interests rates on Wednesday and the Bank of England rate setters were split 7-2 in favour of keeping rates on hold. Only a matter of time before that changes, many believe.
And now the prospect of a trade war.
Investors should be rightly fearful of [the Facebook selloff] given that the tech sector has driven most of the gains in US markets over the past 18 months. A meltdown in this sector has the potential to get very messy indeed, with related ripple out effects.
This week's Fed decision to raise rates and tweak its guidance appears to have cut the rug out further from under the US dollar as policymakers adopted a safety first approach to future rate rise expectations, leaving them unchanged for this year. This appears to have caught markets off balance sending bond yields sharply lower and the US 10 and 2-year spread back towards its previous lows, though some of these declines could also be attributed to concerns about tariffs.
6.32am GMT
#SeaOfRed #nikkei down 4.51% #devastating pic.twitter.com/BjIHpOoCZa
#SP500 -2,52%, #Nikkei -4,4%, #Shanghai Comp -4%. pic.twitter.com/xjqoHtLdoa
6.20am GMT
It's worth looking again at the statement from the Chinese commerce ministry earlier today.
It said that China did not want a trade war, but it was "not afraid" of having one.
China doesn't hope to be in a trade war, but is not afraid of engaging in one. China hopes the United States will pull back from the brink, make prudent decisions, and avoid dragging bilateral trade relations to a dangerous place.
6.18am GMT
The market in Tokyo is closed. It finished down 4.51%, or 974 points at 20,617.
5.58am GMT
Masses of reaction from traders so let's try to roundup some of their comments.
Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo, sounded a slightly optimistic tone to Reuters by saying that US tariffs might not be quite as bad they appear. But then he essentially says it might get worse before it gets better:
In the longer run, protectionist policies touted by the United States could be watered down, in turn limiting the negative effect on trade and the global economy. But until the United States makes such concessions, global stocks will be under pressure and the yen will appreciate, especially if China decides to confront the U.S. measures.
Beijing is extending an olive branch and urging the U.S. to resolve trade disputes through dialogue rather than tariffs. Nevertheless, the first volley of shots and retaliatory response has been set off.
It's a significant step in escalation in trade tensions between the US and China. The biggest watchpoint from here is how China responds to this and any potential escalation that creates going forward.
5.36am GMT
The Australian benchmark index, the ASX200, has closed down almost 2%. The big miners, such as BHP and Rio Tinto, were among the biggest losers amid concern that demand for the country's biggest export - iron ore - will be hurt by the tariffs.
Australia's #ASX200 ends off session lows, but only just... down close to 2% on concerns about a global trade war #ausbiz #stocks #selloff #markets pic.twitter.com/BMVzAX0GbX
BOOM! #Nikkei down 4.5% as trade tensions rise quickly. #China #Trump #Tariffs pic.twitter.com/O09r0z58ps
5.27am GMT
Australia fears it could be hit by steel tariffs after it emerged that an exemption promised by Donald Trump would run on 1 May.
Related: Australia's exemption from Trump steel tariff is temporary, with quotas to come
Related: Trump reveals $60bn of fresh tariffs on China as EU wins reprieve
5.17am GMT
Good afternoon/good morning and welcome to our business live blog on a tumultuous day for the world economy.
China has wasted no time in signalling that it will retaliate against Donald Trump's decision to impose tariffs on Chinese steel and aluminium imports. Beijing's swift response was expected and, although Asian stock markets have been battered in the wake of Trump's move, it left some room for negotiation with a plea for the US to "pull back from the brink".