Chinese benchmark indexes tanked on Monday after U.S. President Donald Trump threatened to implement fresh tariffs on Chinese products, and Chinese Vice Premier Liu He threatened to cancel this week’s trade talks in response to the threats. The Shanghai Composite was down 6.06 percent as of 2:09 p.m. HK/SIN, and the Shenzhen Composite plummeted 7.33 percent. Trump’s threats to raise Chinese tariffs from 10 percent to 25 percent apparently stunned Chinese officials who had been optimistic that the recent round of talks would usher in a deal as early as this coming Friday. According to reports by CNBC, Trump’s new threats came after Chinese officials began to question previously discussed commitments.
Asian indexes were broadly lower on the news and concerns that the highly-anticipated trade deal may crumble. Hong Kong’s Hang Seng Index was down 3.12 percent in the mid-afternoon while South Korea’s Kospi eased 0.74 percent. Australia’s ASX 200 was down 0.81 percent. Japan’s markets remained closed for public holidays.
Some analysts have commented that Trump’s threats are simply a way to force China’s hand, and that they don’t necessarily signal his intent for imminent action. Others, however, question whether Trump’s propensity towards swift actions could have negative effects on the global economy. White House economic adviser Larry Kudlow told Fox News that Trump’s threatening tweet was a “warning”, while Michael Pillsbury, an informal trade adviser to Trump admitted that he took the words “at face value.”
Oil prices also saw immediate declines after Trump’s comments, as an escalation in the trade was would have swift, negative impacts on oil demand. U.S. WTI futures were down 2.28 percent in the mid-afternoon in Asia, to $60.56 per barrel. Brent crude futures were down 2.15 percent to $69.33 per barrel.
The trade war between the United States and China has already caused billions of dollars of losses for both countries and many export-reliant countries have experienced collateral damage. The International Monetary Fund has warned that a full-blown trade war would weaken the global economy significantly.