US, China trade measures could impact global economy

A trade war between the two nations was sparked by Trump, who on Thursday approved a maximum of $50 billion in tariffs on Chinese imports. A likely first target is agriculture - the USA exports massive amounts of sorghum and soybeans to China.

Stock futures fell sharply on Friday morning before rebounding.

As of Friday afternoon, China's only response to the tariffs President Donald Trump announced this week was to say it would defend itself. That could change if it puts tariffs on products like electronics or appliances imported from China.

Amid the looming threat of a trade war escalation, the World Trade Organization's Director-General Roberto Azevedo urged the sides to talk, warning that there will be "no winners" in this confrontation. Still, Donisanu said that after last year's rally, investors are looking for new reasons to feel optimistic about stocks. The yen hit a 16-month high against the dollar on Friday as concerns over rising global trade tensions triggered a bout of investor risk aversion.

The S&P 500 index skidded 38 points, or 1.4 per cent, to 2,605 as of 3:10 p.m. The Nasdaq composite gave up 2.4 percent to 7,166.68.

The all share closed 1.43% lower at 56,405.60 points, and the top 40 lost 1.51%. South Korea's KOSPI retreated 2 percent.

Earlier this month the Trump administration ordered tariffs on imported steel and aluminum, and stocks dropped as investors anxious about the possibility of tougher restrictions on global trade and smaller profits for corporations.

The administration said it would announce in the next 15 days which products would be subject to tariffs.

"We opine that retaliatory tariffs will potentially create further more uncertainty over how global growth and trade may pan out into 2018, and could drag risk appetite further", analysts at OCBC Bank said in a note.

Mr Trump launched his protectionist agenda earlier this month - levying 25% tariffs on steel and 10% on aluminium - in a move created to save USA jobs but which critics fear could backfire and the Bank of England on Thursday warned risked damaging global growth.

"This is probably meant to get China to get more serious in discussions around violations of intellectual property rights and addressing those issues", he said. A Chinese tariff could send the price of US beans plunging by an estimated 40%. They had climbed earlier this week after the Federal Reserve raised interest rates, but then tumbled after the tariffs were proposed. When bond yields decline, investors often bid up those stocks and others that pay big dividends.

"China does not want a trade war, but China is not afraid of a trade war". Indeed, the tax cuts and stepped up spending programme will, by boosting demand at a time of close to full employment, cause an import surge which will make the deficit much worse. Britain's FTSE 100 dropped 1.2 percent. Other health care stocks also sank.

US crude futures were up 1.1 percent at $64.99 per barrel after losing 1.3 percent on Thursday and Brent gained 0.9 percent to $69.53.

The dollar index against a basket of six major currencies slipped 0.3 percent to 89.615.

Wholesale gasoline rose 2 cents to $2.04 a gallon.

  • Rogelio Becker