Trump threatens to put tariffs on all $500bn Chinese imports – as it happened

All the day's economic and financial news, as the US president gives markets something new to worry about

• Trump could impose tariffs on $500bn of Chinese imports
• Trump: Fed is wrong to raise interest rates
• Analysts: Trump risks a currency war
• "Trump is acting like Erdogan"
• Chinese yuan hits fresh one-year low

5.50pm BST

President Trump's controversial comments that the Federal Reserve is wrong to raise US interest rates and his new threats to impose tariffs on $500bn worth of Chinese imports have unsettled investors as the trading week winds to a close.

The dollar was damaged by the remarks, giving some support to Wall Street. But European markets likely to be hit by any escalation of trade tensions, Germany in particular, came under pressure. The final scores showed:

4.28pm BST

Stock markets are likely to remain under pressure even if this latest trade dispute blows over, says Oliver Jones at Capital Economics:

We suspect that equities across Emerging Asia would slump once more if President Trump followed through with his latest tariff threat. Stock markets in Europe would probably be hit even harder than they have been so far too.

Meanwhile, although the S&P 500 has proved fairly resilient to trade worries so far, and has actually risen since they resurfaced in June, we doubt that this will last.

4.04pm BST

Stock markets are off their worst levels, although European indices are struggling compared with the UK and Wall Street. Chris Beauchamp, chief market analyst at IG, said:

After a few days without trade war headlines the topic has come back to life, as Trump turns the trade war rhetoric all the way up to 11 with his announcement that $500 billion of Chinese goods could suffer penalties. Having come away from the NATO summit with an apparent win using his strong-arm negotiating tactics, this move appears designed to bring the Chinese to the table. Markets have recovered from their initial shock, perhaps indicating that this kind of newflash is starting to lose its power.

The news spoiled the FTSE 100's attempt to move above the 7700 zone, which has held back progress for over a month now, while once again the Dax is taking the news on the chin, shedding 150 points as the week winds down and wiping out most of the progress made over the past few days.

3.32pm BST

The dollar remains in the doldrums as the US currency continues to react to Donald Trump's complaints about its current strength, along with investor concerns about the escalating trade war tensions with China.

The dollar index, a measure of its value against a basket of other major currencies, is down 0.6% after it reached a one year high on Thursday.

3.06pm BST

One of the US central bank's members has responded to Donald Trump's comments. Reuters reports:

The Federal Reserve will remain unaffected by President Donald Trump's comments on U.S. monetary policy and is focused on achieving the goals set for it by Congress, St. Louis Federal Reserve Bank President James Bullard said on Friday.

"The (Fed's policy-setting) committee has a mandate to keep inflation low and stable and obtain maximum employment for the U.S. economy, so people can comment, including the president and other politicians, but it's up to the committee to try to take the best action we can to achieve those objectives," Bullard told reporters following an event in Glasgow, Kentucky.

2.48pm BST

US markets have made a nervous start but the falls are not as bad as had been feared earlier. Investors are of course concerned about the latest threats from Donald Trump about imposing tariffs on $500bn worth of Chinese imports to the US, but there is some support for markets from Microsoft's forecast beating results.

The Dow Jones Industrial Average is down 26 points while the S&P 500 opened just 0.06% lower. The Nasdaq Composite managed to edge up slightly, up 0.19% at the start of trading.

2.34pm BST

Still with trade, and German chancellor Angela Merkel said in her annual news conference that US complaints only take into account the trade in good. When trade in services and repatriation of profits are included the figures favour the US, she said.

She criticised the tit for tat tariffs imposed or threatened by the US and China:

We see these potential tariffs both as a breach of WTO rules and also as a danger to the prosperity of many in the world.

2.08pm BST

Back with the US, and Trump is continuing his attack on "terrible" trade deals:

Farmers have been on a downward trend for 15 years. The price of soybeans has fallen 50% since 5 years before the Election. A big reason is bad (terrible) Trade Deals with other countries. They put on massive Tariffs and Barriers. Canada charges 275% on Dairy. Farmers will WIN!

2.03pm BST

Over in Canada, inflation figures came in higher than forecast.

The annual rate rose to 2.5% in June from 2.2% the previous month, more than the expected figure of 2.3%. This is the highest figure since February 2012.

1.54pm BST

And so does the Federal Reserve again:

....The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates - Really?

1.51pm BST

Trump has now turned from trade wars back to currency wars, and this time Europe is getting it too.

China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day - taking away our big competitive edge. As usual, not a level playing field...

1.50pm BST

The latest Trump tariff attack on China at least keeps Europe on the sidelines for the moment, sayd Edward Rumble, co-manager of the RWC Continental European Equity fund. He said:

The potential for more restrictive trade between nations may be a serious threat to global growth, and the steady increase in rhetoric and retaliatory actions was already worrying prior to today's latest comments.

One thing for European investors to consider is that, if Trump is obsessed with China, it does at least temporarily keep his sights off Germany and other European nations. However, given Germany has a a100bn trade surplus with the US, at some stage he will likely come for them as well.

1.48pm BST

The current escalation in trade war rhetoric makes sense in the context of November's mid=term elections, says Will Hobbs, head of investment Strategy at Barclays Smart Investor. He said:

We cannot pretend to know for sure that this is all part of a crude negotiating strategy on the part of the US administration. However, today's sharp escalation makes sense in such a context, particularly with the midterm campaign trail on the horizon - The White House needs to force their opponents to swerve first in this game of trade chicken. On the other side, the political nature of the tariffs threatened to date, such as soybeans, suggests that the Chinese administration see a potential weakness in the President's approaching moment of indirect electoral accountability.

As November's US midterm elections loom larger, we see economic and political self-interest helping to de-escalate the scrap. In the meantime, the potential for capital markets to be dragged into a disciplinary role suggests investors will again need to call upon their stores of composure to see this through.

1.15pm BST

Olaf van den Heuvel, chief investment officer at Aegon Asset Management, warns that the US president risks destabilising the global economy, and the financial markets:

"So far the Trump trade policy has been more about creating leverage in a negotiation than about levying actual tariffs. Of course, as in a game of poker, you sometimes have to up the ante. The risks are high at this level.

The impact on world economic growth of a levy of this magnitude will be severe and will likely have a strong negative impact on markets."

12.48pm BST

Donald Trump is adamant that he won't be knocked off course by stock market volatility.

Wall Street is up around 30% since the 2016 presidential election, which Trump says gives him a cushion to challenge China et al on trade.

This is the time. You know the expression we're playing with the bank's money."

12.33pm BST

European car shares are falling sharply, following president Trump's threat to deepen the trade dispute with China.

Volkswagen are down 2.3%, and BMW have lost 1.5%, on fears that the US could impose tariffs on EU car imports soon.

12.10pm BST

Here's another clip, of Donald Trump explaining why he's "not thrilled" that the US Federal Reserve keeps raising American interest rates:

Trump lays into the Federal Reserve, says he's 'not thrilled' about interest rate hikeshttps://t.co/DlZtnmtUi0 pic.twitter.com/zu8DEmiszL

11.53am BST

CNBC have now released a video clip of their interview with president Trump.

In it, Trump claims that America is being "taken advantage of" by China, the EU, Mexico, and Japan, because they all run trade surpluses with the US.

11.38am BST

Trump's threat to launch a full-blooded trade war with China has alarmed investors.

US stock market futures are falling, suggesting that shares will drop when trading begins in three hours.

11.21am BST

NEWSFLASH: CNBC are now broadcasting their full interview with president Trump (they only released the snippet attacking the Federal Reserve yesterday).

The new top line? Trump is threatening to hit China with a new wave of tariffs, which would drive up the cost of ALL Chinese imports into America, worth around $500bn per year.

I'm not doing this for politics, I'm doing this to do the right thing for our country..... We have been ripped off by China for a long time."

"I don't want them to be scared. I want them to do well...I really like President Xi a lot, but it was very unfair."

Trump says he's 'ready' to put tariffs on all $505 billion of Chinese goods imported to the US https://t.co/4vZUssv20x pic.twitter.com/mI5SFvKWaB

11.13am BST

Donald Trump should blame himself, not the Federal Reserve, for the strengthening dollar, argues Craig Erlam of City firm OANDA.

Erlam writes that Trump's recent tax cuts have stimulated the US economy, at a time when it was doing pretty well anyway......

It's quite clear to most people that part of the reason for the Fed raising rates at the current pace is the tax reform measures passed at the end of last year, when the economy was already running hot.

This is also partially responsible for the dollar rising against other currencies, particularly the yuan and euro, which has suffered further as the President has sought to start a trade war with both. Trump is not one to accept responsibility for such events and now appears to be actively trying to push the blame onto others in a clear attempt to halt the rise in the greenback, the strengthening of which could weigh on the economy and soften the impact of the trade measures he is taking against other countries.

10.48am BST

Reuters points out that Donald Trump has made several public comments about the dollar's strength since taking office....something most US leaders have avoided.

Trump shoots from the hip on the dollar and Fed, territory most presidents in the modern era usually avoided.
Nice graphic from @SaqibReports on Trump's often contradictory dollar comments. https://t.co/vME5vJbt2N pic.twitter.com/DgGJV6vVmk

10.13am BST

Back in the UK, the long task of fixing the public finances continues.

New figures show that Britain borrowed 5.4bn to balance the books in June 2018, 800m less than in June 2017.

Long-term recovery in UK's public finances continued in June. Borrowing in April-June was 16.8bn, compared with 22.2bn last year.
(Look at the light blue bars)

Some wiggle room for Hammond likely in November budget. pic.twitter.com/LDHwFVS83z

10.02am BST

Paul Donovan of UBS Wealth Management has a deliciously acerbic take on Trump's attack on the Fed:

9.45am BST

It's important to emphasise that Trump's criticism of the Federal Reserve is pretty unusual.

The US dollar sold off across the globe [after Trump's attack] and the question on every FX trader's mind is; is the US becoming the new Turkey?

"The answer seems, "no, but....". The Turkish lira lost almost 30% of its value this year mostly because Turkish President Recep ErdoAan is firmly set against higher rates (just like Trump) and is attacking the independence of the central bank (just like Trump).

The big difference however is that the institutions in both countries widely differ and there are miles more of legal obstacles and checks and balances in place before Trump even gets close to have a direct say in the Fed's interest rate policy.

Additionally Erdogan seems surrounded by a group of yes men, while Trump's team sometimes still keep him in check, as evidenced by Deputy Press Secretary Sarah Sanders who went into damage control mode after the comments were made and reconfirmed Trump respects the independence of the Fed.

After starting a trade war, giving tax hand outs to the rich that will likely blow up the US fiscal deficit and antagonizing NATO allies while befriending despotic leaders, this latest action of Trump further establishes the pattern of his capricious, often short term focus.

That in itself is a scary observation and an understandable reason why the dollar sold off."

9.19am BST

President Trump has set "more cats among even more pigeons" with his comments about interest rates and the dollar yesterday.

So says Kit Juckes, foreign exchange expert at French bank Socii(C)ti(C) Gi(C)ni(C)rale.

And as long as [Fed chair] Jay Powell & Co respond to a strong economy and easy fiscal policy with measured policy tightening, they aren't going to send bond yields or the dollar down on their own.

As long as the renminbi is falling in an orderly manner, there is little urgency for the Chinese authorities to counter it.

Whether or not China is wittingly undertaking a depreciation policy, the question will increasingly be on investors' minds as the slide deepens. And the Trump Administration is unlikely to keep quiet for long either

8.57am BST

The Trump administration is determined to push down their currency, says Neil Wilson of Markets.com.

A cheaper dollar would help US companies compete abroad, a key plank of Trump's attempt to make trade 'fairer'.

A clear pattern is emerging - Donald Trump wants a weaker dollar. Prior to his inauguration he said the dollar was 'too strong'. Then earlier this year Treasury secretary Mnuchin echoed those comments when he openly questioned the strong dollar policy.

The Mnuchin effect lasted until the middle of April, but since then the dollar has been on the rise again, with the dollar index hitting 95, a level not seen since November last year.

8.48am BST

Trump's intervention raises the dangers of a full-blown currency war, says Jasper Lawler of London Capital Group.

He says China's response - letting the yuan weaken sharply - is significant.

As Trump moaned about the strength of the dollar, the PBOC devalued the yuan by the most since 2016, sending a chill through the markets.

Interpreted as China's response to the US trade war - the starting of a currency war- risk off is prevailing with traders selling out of equities sending Asian markets and European futures sharply lower. It was only a month ago when China denied that they would start a currency war following Trump's action. A lot can change in a month under Trump.

8.39am BST

Donald Trump's criticism of the Fed came after the US dollar hit a one-year high against a basket of other major currencies.

8.23am BST

Trump singled out China for particular criticism last night, saying it was letting the yuan drop "like a rock".

So he won't be pleased by Beijing's response - the People's Bank of China let the yuan hit a new one-year low today, fixing the currency at 6.7671 per dollar.

8.00am BST

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

"I don't really - I am not happy about it."

"I don't like all of this work that we're putting into the economy and then I see rates going up."

Financial markets across the globe whipsawed on Trump's comments.

The dollar index, which tracks the dollar's performance against a basket of six other currencies, fell from a one-year high and traded just below breakeven. U.S. equities edged off their session lows, but remained lower on the day.