Dow Jones industrial average falls on news of China retaliation in tariff row with US
China recently announced that it will be imposing new trade tariffs on 106 US products, increasing tensions between the two countries and further raising the spectre of a trade war between two of the largest economies on the planet.
$50 Billion Worth Of Products
China’s Ministry of Commerce said that the new tariffs would target $50 billion worth of US products every year, through the application of a 25 per cent duty on US imports, including soybeans, whiskey, chemicals, and automobiles. No start date was given for the introduction of the tariffs.
The Chinese move came in retaliation, just 24 hours after President Trump had announced his own proposals to apply punitive tariffs to Chinese imports. The Trump proposals were far-reaching and covered a number of important sectors, including information technology, aerospace, robotics and communication technology.
The back and forth between China and the US has given global markets the jitters, as investors fear the confrontation could escalate into a generalised trade war. News of China’s retaliatory measures on the Wednesday saw US stocks plunge with the Dow Jones industrial average dropping by over 450 points. In Europe, the pan European Stoxx 600 saw losses of 0.8 per cent following the announcement.
The aerospace giant Boeing is one of the American companies that has felt the uncertainty most, with its share value falling by 4 per cent on the day of the Chinese announcement.
Neil Dwane, global strategist at Allianz Global Investors said: “I think Beijing is very keen to show that it is not going to be bullied, too […] [China] is going to position this as them responding to American aggression rather than necessarily being part of the problem.”
The effects were also being felt in China as the yuan experienced its largest daily drop versus the US dollar in a fortnight, falling 0.4 per cent and hitting a value of 6.3015 per dollar.
Following a meeting at the State Department with Acting US Secretary of State John Sullivan, China’s Ambassador to the United States Cui Tiankai told reporters “Negotiation would still be our preference, but it takes two to tango.”
Chinese Vice Finance Minister Zhu Guangyao said: “We must take some retaliation when people damage our interests. No people can expect China to swallow everything which damages our legitimate interest. It is time for the US administration to change sides back to the right track, keep real dialogue with the Chinese side. We hope that we can work together.“