Shortly after US President Donald Trump warned China not to retaliate after Washington raised trade tariffs on $200 billion worth of Chinese imports to 25 per cent, China announced a plan for retaliatory tariffs on $US60 billion ($83 billion) of US goods from June 1.
Wall Street dived after China defied Washington by reciprocating in announcing trade tariffs. The Wall Street stocks saw their worst day after months over trade dispute. Investors started fleeing equities for less risky assets and sought safety in safe-haven assets.
The US stocks closed the day drastically lower. The Dow Jones Industrial Average plunged by 2.38 per cent or 617.38 points. The S&P 500 (SPX) reduced 2.41 per cent while the NASDAQ Composite fell 3.41 per cent. Gold prices increased to a near three-month high level on Monday.
The Australian share market also plummeted due to intensified trade tensions as it opened on Tuesday. Currently at 3:00 PM AEST on Tuesday, the benchmark S&P/ASX200 index is trading lower at 6,240 points, down by 0.92 per cent or 57.70 points. It touched a low value of 6203.10 points within 45 minutes of the trading on Tuesday. Almost all the sectors are currently trading in red on the Australian Stock Exchange; Financial stocks being the worst hit.
On Monday, Mr Trump issued a warning to China that if a trade deal is not attained, companies will be compelled to leave China for other countries. Hitting back at Washington in defiance of a threat from Donald Trump, China imposed further tariffs on imports from the United States, escalating their ongoing trade war. China timed its tariff announcement just an hour before New York opened on Monday, delivering maximum impact.
Beijing announced that the tariffs on US shipments would rise by “25, 20 and 10” per cent from June 1 and the tariff will be imposed on a total of 5140 US products including frozen vegetables and liquefied natural gas.
The trade tensions aggravated when the US President threatened to increase the tariff rate ON Chinese goods last week. However, investors remained anxious over the trade talks between the US and China regarding tariff hike as the trade talks were set to take place in Washington on May 9 and May 10 between China Vice Premier Liu He and the Trump administration. But the two days of talks to resolve the US-China trade battle ended with no deal.
Mr Trump maintained a brave face amid the market turmoil and called the Chinese move ‘a very positive step’. According to him, the retaliation does not seem to be significant by comparison. He is looking forward to a meeting with Chinese President at a G20 summit in late June.
Also, he has commanded his trade chief to start the process of levying tariffs on the remaining $US300 billion worth of imports from China.
The market analysts believe that the US agricultural community which is already in a severe recession will be worse hit by the ongoing trade war.
Any unilateral threat or blackmail will only result in an intensification of conflict, as per the Finance Ministry of China. The country’s countermeasures were rational and restrained, stated ministry. The ministry specified that the additional tariffs are a reaction to unilateralism and protectionism by US.
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