Stocks tumble as new Trump tariff threat spooks investors

Dwayne Harmon
June 20, 2018

A spokeswoman for the US Trade Representative's Office said the new list would replace the previous $100 billion list that Trump ordered to be prepared in early April as a response to China's first round of $50 billion in retaliatory tariffs. China, claiming the United States had "launched a trade war", retaliated nearly immediately, outlining its own tariffs on USA goods worth $50 billion.

To respond to Trump's threat to impose tariffs on as much as $250 billion worth of Chinese goods, Beijing would have to find other ways to respond.

Trump had already warned at the time of "additional tariffs" should Beijing hit back with tit-for-tat duties on American goods.

"President Donald Trump's unwillingness to back down became apparent this morning, once again sinking markets into a risk-off atmosphere", Jingyi Pan of IG said in a report. Trump's June 15 tariffs came in response to a months-long investigation that documented trade practices from forcing US companies to share trade secrets to subsiding domestic industries which have been widely condemned as unfair.

The US wants China to stop practices that allegedly encourage transfer of intellectual property - design and product ideas - to Chinese companies, such as requirements that foreign firms share ownership with local partners to access the Chinese market. Those tariffs were quickly matched by China's threat to penalize on US exports, a move that drew the president's ire. Donald Trump is now threatening to slap tariffs on $450 billion worth.

Hong Kong-listed shares in Chinese telecoms equipment maker ZTE dived 24.8 percent after USA senators voted to reimpose a seven-year ban on U.S. high-tech chip sales to the company.

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He said China's latest action clearly indicated its determination to keep the usa at a permanent and unfair disadvantage, which is reflected in the massive Dollars 376 billion trade imbalance in goods.

"I do think this is an unusual way to negotiate, upping the pressure and putting on display what kind of damage you are willing to inflict and live with so that the stakes get raised before you sit down at the table", he said. -China Business Council. He asked whether that might include delaying or denying licenses required by USA companies.

Trump said if China increases its tariffs again in response to the latest USA move, "we will meet that action by pursuing additional tariffs on another $200 billion of goods". What's more, unlike Trump's other trade spats, there are (arguably) real national interests at stake in his showdown with China.

Beijing immediately retaliated, matching the USA levy.

Also caught in the crossfire was Chinese telecoms company ZTE Corp, (0763.HK) (000063.SZ) whose rescue by Trump in a deal with Chinese President Xi Jinping appeared in doubt after a U.S. Senate vote on Monday.

Shi Yinhong, a professor of global relations at Renmin University of China, said that with the world's two largest economies now embroiled in "a semi economic cold war", Beijing faced the challenge of getting Trump back to the negotiating table.

"The United States has initiated a trade war that violates market laws and is not in accordance with current global development trends", it added. Trump slapped tariffs on steel and aluminum from Canada, Mexico and the European Union, threatened to kill the North American Free Trade Agreement and is studying new tariffs on auto imports.

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