Investors aren’t happy at the Trump administration’s tendency to rattle the stock market with impulsive remarks.
Since Trump’s threat on Sunday to raise tariffs on Chinese goods worth $200 billion, Japan’s Nikkei has fallen by 1.5%. KOSPI of South Korea fell 0.9%. Dow Jones Futures fell by 130 points on Monday.
Robert Lighthizer, the US Representative for Trade and Steve Mnuchin, the Treasury Secretary, told reporters that China had breached previous agreements during the weekend, which derailed any progress for USA and China reaching on a useful trade agreement.
Penalties are due to rise from 10% to 25% for Chinese goods valued at $200 billion after Trump vowed to increase tariffs, as per Lighthizer, who is the leading trade negotiator for USA.
However, investors were comforted by China’s announcement that its premier negotiator would still be in Washington for talks sometime next week.
Hang Seng of Hong Kong and Shanghai Composite rose around 0.5-0.7%. Losses in European stock exchanges were not more than 0.6%.
Although Dow Jones fell by 470 points in the morning due to investor confidence crumbling, investors later hoped China and USA would find an amicable trade resolution, which resulted in Dow Jones climbing back to close at 66 points down.
However, after Mnuchin and Lighthizer spoke, NASDAQ and S&P 500 futures fell by around 1%.
Investors say that the US increasing tariffs would prompt similar backlash from China. That would hurt companies conducting major trade in China. This increased cost would be passed down to customers, reducing demand and hurting the economy.
A trade war would be bad for everyone. Nobody walks out a winner from a trade war.
Administration officials informed that though tariffs are bound to rise, that doesn’t mean talks have fallen apart completely. Mnuchin refused to comment when asked if China and the US would talk and sort it out before next week ends.