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Updated: 14:08 06/12/21

Markets down as China escalates trade war with USA

By Liam Sheasby, News Editor

04 Apr 2018

Global stock markets continue to suffer as China begins to ramp up its retaliation against trade tariffs imposed by the United States. The Chinese government has imposed a 25% tax on 106 US goods, including soybeans and pork.

Since opening today the FTSE 100 is down 0.47% – a 33.30 points drop since opening. In America, the S&P 500 Index lost 2.2%, while the Dow Jones dropped by 1.9%. Over in Asia and Japan’s Nikkei 225 closed 0.45% down in value (less than the initial 1.5% drop), while the Shanghai Composite ended even lower at 0.84%.

The US Dollar is trending down against the Euro at the moment in the wake of the tariffs, while the Chinese Yuan is steady and even.

President Donald Trump

Why has the US imposed tariffs?

The current trade dispute began back in late January, with President Trump announcing a 30% import tariff on foreign solar panels and washing machines. The argument was made that these cheaper productions were undercutting the US homegrown market, so by implementing the tax it would allow domestic business to grow, though industry experts argued that the changes could cost an estimated 23,000 jobs in 2018 alone.

On March 8th the White House introduced further tariffs, on imported steel (25%) and aluminium (10%) to the US. Again, the argument was made that China was undercutting the market and that these tariffs were a deterrent to either change its policies or suffer the loss of trade.

Within the last few days the US government has detailed 1300 new products from China that will incur a 25% tariff, including TVs and motorbikes. According to the Office of the US Trade Representative, the government tariffs apply to around $50 billion of Chinese imports. When asked about the reasoning behind the move, White House officials said that the proposals were in response to unfair Chinese intellectual property practices.

China has already begun to apply tariffs in opposition. Spokeswoman Lindsay Walters said: "Instead of targeting fairly traded US exports, China needs to stop its unfair trading practices which are harming US national security and distorting global markets.

"China's subsidisation and continued overcapacity is the root cause of the steel crises."

President Xi Jinping of China

Chinese retaliation:

Beijing came out with a statement in response to the US tariffs, saying it “strongly condemns and firmly opposes” the taxes, vowing to act against America. Their response was to match the 25% tariff rate set by the US, taxing 106 goods being exported to China, while additionally reporting the US to the World Trade Organisation for what it considers misuse of national security laws to validate their tariffs.

The products newly tariffed equate to around $3 billion worth of products at present value and hit things ranging from cars, aircraft and chemicals, to corn, nuts, fruit, and wine. The wider scope of impact on US exports is estimated to be nearer $50 billion, based on total export figures from the Chinese commerce ministry in 2017.

The surprising ‘big hitter’ of the tariffs is Soybeans. The little bean is, like wheat and maize, a major part of the global food chain. It’s used as a source of oil for one, but also it feeds livestock in a cheap yet very healthy manner, and its heavily used in vegetarian food products. The genius of the move is that China is the world’s largest import of soybeans, buying around $14 billion worth of beans last year, but as the tweet below says, these soybeans are big business for states that voted for Trump.

In a statement from the foreign ministry, spokesman Geng Shuang said: "Any attempt to bring China to its knees through threats and intimidation will never succeed. It will not succeed this time either.

"There is no winner in a trade war, and an initiator will harm itself as well as others.”

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