Article 4F0FY Trade war: Wall Street suffers biggest selloff since January after China hits back - as it happened

Trade war: Wall Street suffers biggest selloff since January after China hits back - as it happened

by
Graeme Wearden
from Economics | The Guardian on (#4F0FY)

Beijing retaliates to America's new tariffs with fresh taxes on US food, machinery and consumer goods, despite president Trump warning them not to

10.53pm BST

That's all from me for tonight. A quick re-recap....

Related: Global markets fall as China hits back at US with new import tariffs

Related: Trump defends China tariffs as trade war leaves allies and opponents in bind

10.42pm BST

A late newsflash: the US trade representative's offices will hold public hearings on June 17 about whether to impose a new round of tariffs on China.

These talks will focus on around $300bn of Chinese imports that haven't been dragged into the trade war so far.

10.36pm BST

Today's market mayhem is prominently covered in tomorrow's UK newspapers. Here's a few early front pages....

CITY AM: Red Mist #tomorrowspaperstoday pic.twitter.com/8UreQ22VH1

Tuesday's Financial Times
"Global markets reel as Beijing hits back at 'US protectionism'" #tomorrowspaperstoday#bbcpapers
(via @hendopolis) pic.twitter.com/AxFibK1prp

TIMES BUSINESS: Markets in retreat as China steps up trade war #tomorrowspaperstoday pic.twitter.com/hNJ8Qe9lMm

9.47pm BST

China's decision to impose higher tariffs on thousands of US goods -- from spinach and coffee to batteries and antiques -- has clearly given investors a lot to think about.

It's clearly a punchy response, just hours after president Trump tweeted that Beijing should do no such thing. Some investors had clearly expected a more moderate reaction.

"It's clear that there is a lot of nervousness around the U.S.-China trade negotiations and concern that it's really deteriorating pretty significantly and that's impacting all areas of markets.

9.14pm BST

9.10pm BST

Newsflash: The US stock market has closed with a shudder, as the escalating trade war with China scares Wall Street .

The Dow Jones industrial average and the S&P 500 have both posted their biggest losses since January 3rd, while the tech-focused Nasdaq had its worst since last 2018.

9.01pm BST

William Reinsch of Washington's Center for Strategic and International Studies suspects that Donald Trump and Xi Jinping will eventually try to resolve the trade war themselves.

But who would win such a battle? Reinsch's money is on the Chinese leader.

One clear consequence is that the two presidents have effectively declared themselves the chief negotiators. Trump has been overruling his various representatives for some time, and it looks like Xi Jinping did the same to Liu He. The result is that both negotiators know they do not have full authority, and anything they agree to risks being countermanded.

That means reaching an agreement can only be done at the top. If you're going to act as the negotiator, then eventually you actually have to negotiate. This is also one of those cases where each president thinks he can get the better of the other. Xi probably thinks, correctly, that he will know the details better than Trump and can outwit him. Trump thinks, less correctly, that he is a better negotiator and can intimidate Xi. Not a recipe for a successful outcome, but the two presidents have, by their own actions, made a meeting inevitable.

8.42pm BST

Donald Trump is certainly keeping us on our toes. He's now told reporters at the White House that US farmers will get $15bn in new aid.

"We're going to take the highest year, the biggest purchase that China has ever made with our farmers, which is about $15 billion, and do something reciprocal to our farmers so our farmers can do well."

8.37pm BST

From Washington, my colleague David Smith has written about how Donald Trump is at odds with some in his own party over trade:

Not for the first time, Trump is scrambling political allegiances. It is especially awkward for Republicans. The president's protectionist "America First" agenda flies in the face of the party's free market principles and threatens to hurt voters in red states.

Farmers are one example. At a news conference organised by the campaign group Tariffs Hurt the Heartland, in response to the raising of tariffs to 25%, Brent Bible, a soybean and corn farmer in Lafayette, Indiana, said: "Our competitive advantage has always been we are a reliable source of product. This has taken that away.

Related: Trump defends China tariffs as trade war leaves allies and opponents in bind

7.42pm BST

Hmmm. Newswires are now reporting that president Trump has said he's not decided whether to impose new tariffs on all remaining Chinese imports.

This is helping stocks pull back in New York...

TRUMP: NO DECISION YET ON TARIFFS ON SOME $300B OF CHINA GOODS

Slight move off lows on S&P500 after headline from Trump pic.twitter.com/zkGzixpKGf

7.03pm BST

Here's our news story on the latest trade war developments, and the stock market losses.

Related: Global markets fall as China hits back at US with new import tariffs

7.00pm BST

Investors weren't expecting such a firm response from Beijing, says Samantha Azzarello, global market strategist for JP Morgan.

She told Bloomberg:

China retaliating as fast as they did was a clear signal they're not going to be pushed around.

Markets would like a little bit more play nice and maybe even a bit of complacency from China. It was interesting it wasn't done on the weekend. It was done just in time, Monday morning for markets to open.

6.41pm BST

It's certainly been a volatile May:

Dow, S&P 500 set for worst May tumble in nearly 50 years amid U.S.-China trade clash https://t.co/i6839BAq8x

6.32pm BST

Today's rout means the Dow Jones industrial average has lost 5% this month, its worst start to any May since 1970, according to Dow Jones Market Data.

The Nasdaq has lost 5.7%, which is its worst early May since 2000 (after the dot-com bubble burst).

6.21pm BST

The sell off is intensifying in New York.

The Dow Jones industrial average now down 701 point at 25,240, a slide of 2.7%. That's one of the worst drop in several months.

5.16pm BST

Apple is being hit on two fronts today.

As well as the trade war angst, the tech company has lost a legal challenge from a group of iPhone owners who claim its App Store monopoly breaks antitrust rules

Apple's stock falls through key chart levels toward an official correction, after the U.S. Supreme Court ruled that consumers can proceed with an antitrust lawsuit against the tech-behemoth's marketplace for iPhone apps https://t.co/m8NcPx2mBu pic.twitter.com/crjda0xM4y

5.09pm BST

Marketwatch have created this neat chart showing how much US-China trade is at stake.

When the world's two largest economies - Godzilla and Ghidorah - engage in a major clash there's bound to be little attention paid to anything else.

Retail sales, home construction and industrial production are on the docket this week, but it won't matter much to Wall Street if the U.S. and China can't resolve a tense dispute over trade rules that's festered since last summer.

4.55pm BST

There's not been any official response from the US to China's decision to hike tariffs on up to $60bn of goods.

But Donald Trump will not be happy -- having warned China this very morning not to retaliate.

The move will risk provoking the ire of Mr Trump, who had warned China earlier on Monday not to retaliate to the latest US measures.

That could make the prospect of US tariffs being imposed on the remaining $300bn of Chinese imports - provisional details of which were due to be published by the US Trade Representative later on Monday - even more likely.

4.42pm BST

Ouch! Trade war fears have driven Britain's FTSE 100 down to its lowest close in two months.

European stock markets suffered a sharper selloff, with consumer goods manufacturers, technology firms and mining companies all dropping.

4.36pm BST

Wall Street traders are looking pensive, and even a little shell-shocked today, as markets suffer a hefty rout:

4.22pm BST

I think a recap might be helpful.

I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don't make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China. You had a great deal, almost completed, & you backed out!

U.S. stocks are set for the worst drop in 4 months after China retaliated with fresh tariffs in the ongoing trade dispute. The Nasdaq is off 3% https://t.co/ApyTg75pgJ pic.twitter.com/MJFs3BfikR

4.19pm BST

Boom! The Dow Jones industrial average has now sunk by 610 points, or 2.35%, to 25,331 points.

That's a fresh two-month low.

3.43pm BST

The trade war between the US and China has been rumbling on for roughly a year now.

The latest escalation, with fresh tariffs imposed at both borders, could hurt global growth badly, says Neil MacKinnon, global macro strategist at VTB Capital.

"Uncertainty over the outcome of the US-China trade talks has rattled investor sentiment and an escalation in tariffs threatens to worsen the outlook for the global economy."

3.36pm BST

The UK stock market is sliding towards its lowest level in two months, as US-China trade war fears give global investors the shivers.

The FTSE 100 index has lost 38 points to 7,167 points in late London trading; it hasn't closed lower since mid-March.

3.27pm BST

The sell-off on Wall Street is getting worse.

3.18pm BST

The list of nearly 2,500 US products that will now incur a 25% tariff when sold to China is long, and varied (and online here, in Mandarin).

It includes food products, such as meat, honey, bamboo, frozen peas and spinach, roasted coffee, green teas, various oils, fruit juice and stuffed pasta.

2.59pm BST

China hasn't said anything officially about stopping buying US government debt. But the very hint (via the Global Times newspaper) that the idea is being talked about in some quarters is worrying investors.

Neil Wilson of Markets.com says China has hit back hard at America:

US equity markets are taking a battering as China has responded in kind to US tariffs. Beijing will slap tariffs on up to $60bn in goods, and reports suggest China may also stop purchasing US agricultural products. There is even talk - the ultimate worry - of China dumping US Treasuries. This was also the ace up the sleeve for China. Whilst China is running out of US goods to tax, it does have other tools it can use to put pressure on the White House.

Make no mistake this is a serious escalation and we have a trade war on our hands again. The breakdown last week has not proved temporary and it seems China is prepared to go toe-to-toe with the US on this. Ultimately though we should assume that after this spat - which is about face as much as anything - we should see the parties come around to talks again. Quite whether they can ever achieve a meaningful deal is another matter - talks could extend into 2020 with no result. I just have this sense this going to rumble on fruitlessly for a long time.

2.48pm BST

Shares in Boeing have lost 3% of their value.

The suggestion that Beijing is considering buying fewer planes from the US manufacturer is unnerving investors in New York.

Apple leads the Dow lower, plunging 5% at the open, after China retaliates against U.S. tariffs https://t.co/f9gqfZqnW7 pic.twitter.com/5TP2QNifuC

2.44pm BST

It's early days, but Wall Street is on track for its lowest close since late March.

2.41pm BST

Major technology companies are being hit hard by the latest tit-for-tat retaliations between Washington and Beijing.

Apple is looking particularly bruised, sliding by 5%. It would be hurt if America imposes tariffs on all goods made in China, as many products such as iPhones are assembled there.

2.37pm BST

Newsflash: The US stock markets has opened sharply in the red, as a wave of selling sweeps through Wall Street.

2.24pm BST

The official statement from China's Ministry of Finance is online here, in Mandarin.

It appears that China is hiking the tariffs on over 4,000 products. They're part of $60bn worth of US goods which were first targeted last year (when Donald Trump imposed 10% tariffs on $200bn of Chinese imports).

On May 9, 2019, the US government announced that since May 10, 2019, the tariff rate imposed on the $200 billion list of goods imported from China has increased from 10% to 25%.

The above measures by the United States have led to an escalation of Sino-US economic and trade frictions, contrary to the consensus between China and the United States on resolving trade differences through consultations, jeopardising the interests of both sides and not meeting the general expectations of the international community.

2.06pm BST

European stock markets have sunk to new seven-week lows, as traders fear that the US-China trade war is escalating alarmingly.

Every bourses is in the red, dragging the EU-wide Stoxx 600 index down by over 1%.

There is a danger of miscalculation with Trump overplaying his hand and the Chinese being unwilling to lose face and accommodate his demands.

Somewhat surprisingly, the direct impact on economic growth of these tariff increases - even if they all went ahead - should not be that large. Rather, the main risk lies in the indirect effects on growth stemming from the hit to business confidence and likely sell-off in equity markets. These would very likely exceed the total direct impact.

1.52pm BST

Here's some instant reaction to China's retaliation:

Here we go: China has announced it will be raising tariffs on $60 billion worth of U.S. goods from midnight (Beijing time) June 1, according to China's State Council Customs Tariff Commission

#China to hike tariffs on $60bln of U.S. goods. Starting from Jun 1 at 00:00, the goods will be taxed at rates of 25%, 20%, or 10%. Products at a 5% tariff will remain the same, according to the Customs Tariff Commission of the State Council.

China says it's going to raise tariffs on 2,493 U.S. goods, up to 25%, starting June 1. Apple shares fall further pre-market, down more than 3% after falling 9% last week. https://t.co/VK9eiq1ZcF pic.twitter.com/tOROVRItUB

1.33pm BST

Ouch! Wall Street is now heading for sharper falls, as the sight of China hitting back against the US gives investors a fright.

The Dow Jones industrial average is bring called down 464 points, or 1.8%, to 25,500.

US Opening Calls:#DOW 25497 -1.75%#SPX 2830 -1.82%#NASDAQ 7401 -2.48%#IGOpeningCall

NASDAQ 100 futures getting destroyed https://t.co/exlLjndNXP pic.twitter.com/FX9uf9ePXg

1.29pm BST

China's Global Times's editor in chief, Hu Xijin, is reporting that Beijing is also considering stopping buying US agricultural products -- which would be a serious blow to American farmers.

China is also considering slashing orders for new Boeing planes, he adds. If so, that would further ratchet up the trade war.

China may stop purchasing US agricultural products and energy, reduce Boeing orders and restrict US service trade with China. Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically.

1.26pm BST

China hits back at US tariffs, announcing tariffs of between 25 and 5 percent on 5,140 US-based products: China's Ministry of Finance pic.twitter.com/rYxHyEkz5e

1.22pm BST

NEWSFLASH: China has just escalated the trade war with the US, by announcing plans to hike tariffs on American goods bought by Chinese companies.

Beijing says that it will set new tariffs of between 5% and 25% on $60bn of US imports.

1.07pm BST

Wall Street is still heading towards a weak open, with less than 90 minutes to go.

The orange line is the S&P 500, the white line is S&P 500 futures (that began trading last night), which indicate a weak open on growing trade jitters: pic.twitter.com/VIQ25jgPcF

1.02pm BST

Wall Street giant Goldman Sachs has produced new research showing clearly that US consumers are paying the price of the trade war.

In a new research note, Goldman showed that prices in the shops have risen since the trade war began, and that Chinese firms have not - as Trump argues - cut their prices to compensate.

"One might have expected that Chinese exporters of tariff-affected goods would have to lower their prices somewhat to compete in the US market, sharing in the cost of the tariffs.

"However, analysis at the extremely detailed item level in the two new studies shows no decline in the prices (exclusive of tariffs) of imported goods from China that faced tariffs."

Goldman Sachs has a simple retort to all those who say Trump's tariffs aren't causing consumer prices to go up... pic.twitter.com/PIVmLoUzSx

12.36pm BST

Another eyebrow-raising tweet from the White House....

The unexpectedly good first quarter 3.2% GDP was greatly helped by Tariffs from China. Some people just don't get it!

12.20pm BST

Is Donald Trump correct that China picks up most of the new tariffs on their goods entering the US, as he just tweeted?

It appear not.

Those numbers appear to be estimates from a 2018 report based on historical data, said David Weinstein, an economics professor at Columbia University and one of the authors of the March study. Actual data on tariffs and trade from 2017 and 2018 showed that foreign firms didn't lower their prices at all, so the full impact was born by U.S. firms and consumers, he said.

A separate paper published in March by economists Pinelopi Goldberg, the World Bank's chief economist, Pablo Fajgelbaum of UCLA, Patrick Kennedy of the University of California, Berkeley, and Amit Khandelwal of Columbia Business School also found that consumers and U.S. companies were paying most of the costs of Trump's tariffs.

12.13pm BST

Trump really is taking aim at China...

Remarkably, he's now tweeted that the country will be 'hurt very badly' unless they agree a trade deal.

I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don't make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China. You had a great deal, almost completed, & you backed out!

11.52am BST

Newsflash: Donald Trump has warned China not to retaliate against the latest tariffs, warning that the situation 'will only get worse' if they do.

In an early morning Tweet thread, the president also denies that US consumers will pay the tariffs -- claiming that China picks up almost all of the bill (even though American firms actually pay it).

Their is no reason for the U.S. Consumer to pay the Tariffs, which take effect on China today. This has been proven recently when only 4 points were paid by the U.S., 21 points by China because China subsidizes product to such a large degree. Also, the Tariffs can be.....

....completely avoided if you by from a non-Tariffed Country, or you buy the product inside the USA (the best idea). That's Zero Tariffs. Many Tariffed companies will be leaving China for Vietnam and other such countries in Asia. That's why China wants to make a deal so badly!...

..There will be nobody left in China to do business with. Very bad for China, very good for USA! But China has taken so advantage of the U.S. for so many years, that they are way ahead (Our Presidents did not do the job). Therefore, China should not retaliate-will only get worse!

11.35am BST

China's CSI 300 index has ended the day down 1.6% at 3,668, a drop of 61 points.

President Trump on Friday raised tariffs on $200bn worth of Chinese imports from 10% to 25% and is now examining slapping tariffs on all remaining goods imported from China - worth about $300bn. The rhetoric and posturing is not good for risk and events over the last few days diminish the likelihood we will see a meaningful deal done.

When we look at the posturing with Iran, it looks like the geopolitical hawks in the White House are in control. And unlike the weak Theresa May, Donald Trump is prepared to do no deal rather than a bad deal.

11.13am BST

Chinese state television is also hammering home the 'never surrender' message.

Reuters reports:

State television said...that the effect on the Chinese economy from the U.S. tariffs was "totally controllable".

"It's no big deal. China is bound to turn crisis to opportunity and use this to test its abilities, to make the country even stronger."

10.54am BST

China's People's Daily Newspaper has also declared that Beijing won't back down in the trade dispute.

An editorial in the state-controlled newspaper says:

"China has been pushing forward the bilateral talks with a high sense of responsibility and maximized sincerity, but it will never yield to the extreme pressure from the U.S., or compromise on matters of principle."

U.S. to take full responsibility - People's Daily (in a front-page commentary)
*U.S. tariffs "cast a shadow on the trade talks and directly led to the fruitless outcome" of trade discussions, the paper said.
*Link (Chinese): https://t.co/79v7SRXZ6U

10.22am BST

Crude oil is rallying this morning, as tensions in the Middle East rise alarmingly.

The cost of a barrel of Brent crude oil has jumped by 1.6% to $71.76, after Saudi Arabia reported that two of its oil tankers were attacked off the coast of the United Arab Emirates on Sunday, in the Gulf of Omab.

10.04am BST

Dawn is about to break in New York, but investors there aren't in a sunny mood....

With trade talks deadlocked, U.S. stock futures point to a rough day for Wall Street. S&P, Dow and Nasdaq futures all down 1%. https://t.co/GtTGMsic3k pic.twitter.com/dqF1EVkOdo

9.37am BST

Eleanor Creagh of Saxo Bank fears that the Chinese yuan could keep falling, as the trade war intensifies.

The yuan is typically tightly managed by Beijing, so weakening the currency would make Chinese exports more competitive -- cushioning the blow from new higher tariffs at the US border.

#Yuan stability/depreciation has been a proxy for #trade deal. With the tariff man back in action and optimism on trade deal fading watch yuan as a proxy for #China's intentions #USDCNH #USDCNY pic.twitter.com/WMTNIjfa2I

#yuan extends losses...hit new low since Jan. As tensions escalate, expect weaker yuan...both as a proxy to gauge status of negotiations and retaliation/partial offset of 25% tariff to boost Chinese exporters competitiveness https://t.co/Wmf5TD8E0x

9.35am BST

The Chinese yuan is being buffered by trade war worries.

The yuan is on track for its biggest daily fall in nine months today, currently down almost 0.8% at 6.8735.

Asian markets have reacted to the lack of progress in US/Chinese trade talks by selling the yuan and won, driving equity indices lower, and sending bond prices and the yen higher.

9.29am BST

Leading Chinese journalist Hu Xijin believes China is absolutely serious about not backing down to US pressures.

He's tweeted that Beijing is committed to its three key demands, and won't compromise otherwise:

China has made public 3 core concerns that must be addressed &it won't make concessions on. From perspective of China's politics, there is little room for compromises. They will insist.This political logic won't be changed no matter how much additional tariffs the US will impose.

The sooner new tariffs on $300 b of Chinese goods come, the better. That means trade war comes to the 1st turning point, shifting from a comprehensive US offensive to a stalemate. The two sides will then compete on endurance. China's political system will ensure we won't lose.

China is obviously less powerful than the US, but it has strong capability to protect its core interests, which are narrow in scope. Even N.Korea is strong when it comes to its core concerns.China respects US interests, the US should also be able to discern China's core interests

9.14am BST

Newsflash: China's government has hit back at Washington, vowing not to cave into attacks from the US government,

Speaking to reporters in Beijing, foreign ministry spokesman Geng Shuang struck a defiant tone. He said China would "never surrender" to foreign pressures, despite America now drawing up plans for tariffs on all Chinese imports (an extra $300bn).

"China will never surrender to external pressure. We have the confidence and the ability to protect our lawful and legitimate rights,"

Reuters: #China's foreign ministry, asked about trade dispute with #US, says China will never surrender to foreign pressure

"As for the details, please continue to pay attention."

9.04am BST

European stock markets have fallen to their lowest level since late March, following losses in Asia.

Nervously waiting for China to blast back following last week's aggressive trade war volley from the US, the European indices limped through the ope

With last week's trade talks failing to yield an agreement between Beijing and Washington - funny how that happens when you severely hike tariff rates between days 1 and 2 - and Trump continuing to tweet up a storm, investors are now braced for China's retaliation, an attack that is yet to materialise.

8.41am BST

Chinese car sales have fallen for the 10th month running, in a sign that its economy is weakening.

8.27am BST

Soybean prices have slumped to their lowest level since the 2008 financial crisis, driven down by the prospect of a deeper China-US trade war.

8.05am BST

The stock market boards in China are a sea of green today - and that's bad news for investors, as it means shares are falling.

"The lack of resolution in the latest U.S.-China trade talks coupled with continued provocative tweets from President Trump provides no relief for risk sentiment as we look to another weak start to the week for Asia markets."

7.59am BST

Donald Trump's chief economic advisor, Larry Kudlow, revealed yesterday that the White House expects China to hit back soon.

He told Fox News:

"The expected countermeasures have not yet materialized. We may know more today or even this evening or tomorrow."

Call it three months. I don't know. That will take some time and then of course the president's going to have to make the final decision on that."

Related: China expected to retaliate over Trump tariff hike, economic adviser says

7.45am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

"Earlier today, at the direction of the President, the United States increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports. The President also ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion."

We are right where we want to be with China. Remember, they broke the deal with us & tried to renegotiate. We will be taking in Tens of Billions of Dollars in Tariffs from China. Buyers of product can make it themselves in the USA (ideal), or buy it from non-Tariffed countries...

....We will then spend (match or better) the money that China may no longer be spending with our Great Patriot Farmers (Agriculture), which is a small percentage of total Tariffs received, and distribute the food to starving people in nations around the world! GREAT! #MAGA

Today, US Trade Representative will begin the process of "imposing tariffs on all remaining imports from China" per Robert Lighthizer's statement on Friday. Markets are also waiting for China's retaliation, as it has close to run out of US imports on which to impose tariffs.

China said the US had "severely disrupted" trade talks in a People's Daily Commentary, though as we go to press, no retaliatory measures have been announced yet.

Emerging Market stocks pushed down further as risks of an escalation of the #trade dispute between China and the US increase. MSCI Emerging Markets Future down 7.5% from its April high. pic.twitter.com/orAwliNMZN

"The sudden, unexpected collapse ahead of the final step to ink a 150-page long trade deal caught market by surprise"

"Markets will tread cautiously, with the market focus still be on any developing headlines about China's possible retaliatory moves and next steps for trade talks from here until Trump and Xi meet at the G20 meeting in late June.

European Opening Calls:#FTSE 7215 +0.16%#DAX 12083 +0.19%#CAC 5344 +0.32%#MIB 20902 +0.13%#IBEX 9129 +0.12%

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