The US stock market indexes are in doldrums since Donald Trump threatened to impose new tariffs on $200 billion worth of Chinese products.
Initially, Trump proposed imposing 25% tariffs on $50 billion worth of Chinese products. China was quick to retaliate, stating it would impose a similar tax on US products. For Trump, this stood as the last straw, and he upped the tariffs to be applied to $200 billion worth of Chinese products. The president threatened that they would activate these additional taxes if China continues in its “unfair practices related to the acquisition of American intellectual property and technology.”
“If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200bn of goods,” Trump claimed.
China’s commerce ministry, however, is prepared to fight against these new tariffs. A spokesperson for China’s commerce ministry said they would fight back with “qualitative” and “quantitative” measures, stating:
“If the US acts irrationally and issues a list, China will have no choice but to take comprehensive measures of a corresponding number and quality and take strong, powerful countermeasures.”
Traders are showing growing concerns about the escalating trade war between these two large economies, as several US stock market indexes struggle. The S&P 500 index plunged in the last three straight sessions before generating some gains on Wednesday. The index is weighed down by the drop in stock prices across the US industries.
Donald Trump believes that China has snatched hundreds of thousands of jobs from Americans over the last couple of years. Trump’s trade adviser Peter Navarro said, “Trade policy against China will be ‘eventually bullish’ for U.S. based companies and the general public, as the government is planning to bring ‘structural change.'”
Stock markets of both countries are posting big losses. Shanghai stock exchange closed the Tuesday trading session at its lowest level in the last two years.
The US Dow Jones Industrial Average, which has been under pressure since the start of this year, plunged for the sixth straight session. The largest US industrial companies that have extensive market penetration in Chinese markets are struggling amid the potential trade war. Boeing (NYSE:BA) shares are down 8% in the last five sessions, while shares of 3M Company (NYSE:MMM) and Caterpillar (NYSE:CAT) have also been generating big losses.
The NASDAQ index, which recently hit an all-time high, is under pressure now that some of the computer chip makers are showing their concerns over the possible trade war. Large semiconductor and chip maker companies like NVIDIA (NASDAQ:NVDA) and Qualcomm (NASDAQ:QCOM) have extensive exposure to Chinese markets.
Jim O’Neill, an economist and the chairman of think tank Chatham House, says, “Further tension in U.S.-China relations could end up hurting some iconic U.S. companies the most.“
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