Last week U.S. President Donald Trump committed to imposing fresh tariffs on $50 billion of Chinese goods. In retaliation, Beijing announced its own tariffs on $50 billion of American imports. It seems, however, that time does not heal all wounds; on Monday, President Trump threatened to impose additional 10 percent tariffs on $200 billion of Chinese goods. China, in turn, warned that it will respond with “qualitative” and “quantitative” measures. “The United States has initiated a trade war and violated market regulations, and is harming the interests of not just the people of China and the U.S., but of the world, the Chinese commerce ministry said in a statement on Tuesday. According to Reuters, the U.S. imported $505.47 billion of Chinese products in 2017, while China purchased $129.89 of American goods.
Trump’s retaliatory approach has worried traders and directly impacted global markets. On Tuesday, Asian markets were broadly lower, after suffering moderate losses on Monday. The Shanghai Composite was down 3.05 percent as of 1:47 p.m. HK/SIN, and the Shenzhen Composite tanked more than 4 percent. Hong Kong’s Hang Seng Index was down 2.44 percent and the Nikkei 225 suffered a 1.45 percent loss in the early afternoon. Australia’s ASX 200 managed to squeeze out a 0.21 percent gain. U.S. indexes are expected to open lower.
Though analysts question just how much the trade spat will impact global markets in the long run, investors do seem to be reacting with caution to Trump’s threats. China’s economy had already been struggling with various economic problems including rising credit defaults, increasing debt and a slowdown in fixed asset investments that stemmed from the governments deleveraging objectives.
On the currency markets, the dollar eased substantially against the yen, trading at 109.61 after hitting a 110.5 handle during Monday’s New York trading session. The greenback also declined against the euro too trade at $1.162. The Australian dollar skirted one-year lows, trading down 0.54 percent to $0.738. China’s yuan was trading at a five-month low.