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US-China tit-for-tat tariff war escalates

Beijing pushed ahead on Sunday with increased duties of between 5% and 10% on a range of American goods while the Trump administration imposed tariffs on roughly US$110 billion in Chinese imports.

The world’s two largest economies imposed a fresh round of tariffs on each other’s goods on Sunday, causing oil prices and markets to tumble on trading Monday amid concerns on a weaker global growth.

Beijing pushed ahead on Sunday with increased duties of between 5% and 10% on a range of American goods. Items involved in the tariff hike include soy beans and crude oil.

The tariff hikes are part of China’s Ministry of Finance’s announcement made on August 23 on retaliatory tariffs on US$75 billion worth of United States (US) goods.

The Trump administration imposed tariffs on roughly US$110 billion in Chinese imports on Sunday, affecting consumer goods including footwear and apparel items as well as technology goods like the Apple Watch.

The US will impose 15% of tariffs on another group of goods on December 15 which will impact items like laptops and cell phones.

Most Asian markets fell on Monday in a response to the fresh round of tariffs on goods worth hundreds of billions of dollars.

Brent crude was down 42 US cents, or 0.7%, at US$58.83 a barrel in early trading, while US oil was down 27 US cents, or 0.5%, at US$54.83 per barrel.

Investors took to safety with a shift to the yen which traded higher against the US dollar when currency markets opened for trading. At around 4pm Singapore time, the yen held flat against the US dollar, at ¥106.26.

US president Donald Trump has reiterated that the two sides are expected to hold talks this month to negotiate on the trade war.

Experts are less optimistic on the situation and do not think that the talks could be resolved in the near term.

‘With risk aversion, the favouring of the safe-haven yen to greenback and the avoidance of emerging Asia currencies remain the protocol going into September,’ commented IG market strategist Pan Jingyi.

The fresh month itself may offer little respite from the trade rhetoric with the next juncture for additional tariffs expected to strike on October 1 which will also be China’s National Day, Ms Pan said.

Even if talks take place, the global market is likely to approach the event with caution seeing how the earlier iteration ended up in smoke, she said.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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