HONG KONG (AFP) - Asian markets fell sharply yesterday as US President Donald Trump’s decision to slap new tariffs on China ratcheted up investor fears over the trade war between the world’s top two economies.
The losses in Asia followed a broad-based sell-off on Wall Street, where the Dow finished 1.1 percent lower on Thursday, losing more than 400 points following Trump’s announcement that Washington would impose 10 percent in tariffs on another US$300 billion in Chinese goods.
The decision came just as US markets were rallying on the back of the Federal Reserve’s decision Wednesday to cut interest rates for the first time in more than a decade.
“The 10 percent is for a short-term period and then I can always do much more or I can do less, depending on what happens with respect to a deal,” Trump said at the White House, adding, “it could be lifted up to well beyond 25 percent.”
The announcement means virtually all of the US$660 million in annual trade of goods between the world’s two biggest economies will have tariffs on them, with the new duties set to take effect September 1.
The US decision came after trade negotiators held talks in Shanghai this week, the first face-to-face discussions since Trump and Chinese President Xi Jinping agreed to a truce in June. China warned Friday it would take “countermeasures” if the US followed through on its threat, with the commerce ministry calling the decision a “serious violation” of the June truce.
Negotiators are expected to reconvene in Washington in early September for another round of talks.
On Thursday Trump told reporters he was “not concerned at all” by the negative reaction among investors, saying he had anticipated it. “Trump sent the market in a tailspin,” said Alfonso Esparza, senior market analyst at OANDA.
“So far, the US consumer has been spared from the tariffs on Chinese goods, but as Trump’s threats grow in scope, so does the potential impact (as) higher costs will have to be passed down from American companies”, he added.
Hong Kong lost 2.4 percent, while Tokyo declined 2.1 percent and Shanghai fell 1.4 percent. Taipei and Seoul also finished down.
European stock markets also tumbled in early trade, with London falling 1.5 percent, while Frankfurt slumped 2.2 percent and Paris was down 2.3 percent.
“Selling will likely lead trade”, Okasan Online Securities said in a note. “There are fresh signs that US-China trade frictions are worsening again” while investors are likely to stay away from buying ahead of the weekend, it added.
Tit-for-tat moves by Japan and South Korea to rescind each other’s favoured export partner status added to the trade jitters, as the US allies spar over a long-running dispute on forced labour during World War II.
A string of South Korean court rulings ordering Japanese companies to compensate forced labour victims has infuriated Japan, which argues the issue was resolved when the two countries normalised ties.
The latest measures come after Tokyo last month tightened the rules on exports of three products key to South Korea’s chip and smartphone industries, raising fears for global supply in the sectors. Oil prices made a cautious recovery after suffering a rout Thursday as Trump’s tariffs announcement fuelled concerns about lower demand, sending Brent plunging seven percent and WTI plummeting 7.9 percent, its worst decline in a session since February 2015.