Published: Tue, May 07, 2019
Markets | By Erika Turner

Shares dive as Trump tweets rattle investors

Shares dive as Trump tweets rattle investors

Financial markets across the globe plummeted on Monday following a re-escalation in US-China trade tensions as US President Donald Trump threatened to slap China with new tariffs.

Trump said tariffs on $200 billion of goods would increase to 25 percent on Friday from 10 percent, reversing a decision he made in February to keep them at the 10 percent rate thanks to progress between the two sides.

Trump's comments on Twitter came as a Chinese delegation was scheduled to resume talks in Washington on Wednesday aimed at resolving a trade war that has shaken investors and cast gloom over the world economy.

The US announces it will impose tariffs of 25 per cent on US$50 billion (S$68.2 billion) of Chinese imports, particularly electronics, in the first round of tariffs specifically targeted at China.

A second source said Trump's decision to more than double the tariff rate on $200 billion of goods was meant to send a message to Liu to not come to the US with more "empty offers". The president has continually said America is getting the short end of the stick when it comes to our trade agreements with China. Trump was apparently tweeting out of frustration over Chinese resistance to some of his bigger demands; he succeeded in rattling US investors, at least.

One source had said the Chinese vice premier would likely cancel the trip he'd planned for himself and a 100-person delegation for the final round of talks that USA officials had previously said could yield a deal by Friday.

The US president originally imposed a 10 percent tariff on these goods in September that was due to rise in January, but postponed this as negotiations advanced. In total, America has tariffs on US$250 billion of Chinese goods, while China has tariffs on US$110 billion of American goods. That's emboldened trade hawks within the Trump administration to push for a harder line, including the raising of tariffs, the people said. In dollar terms, a decline in two-way trade of $25 billion accounts for around 0.5 percent of global trade. The Aussie fell 0.6 percent to 69.75 US cents.

Chinese media outlets have been told not to independently report on Trump's overnight tweets or tweet about them, and instead adhere to any report from the official Xinhua news agency, said a source with direct knowledge of the matter.

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The Shanghai Composite Index has dropped by 5.6 percent to 2906.46, while Shenzhen Composite has lost 7.4 percent and stands at 1515.8 after closing today.

A breakthrough in the trade talks could restore normality, he said. That follows talks in April in Beijing that Treasury Secretary Steven Mnuchin called "productive".

Trump has portrayed his tariffs as a moneymaker for the United States and a benefit to the USA economy. The Tariffs paid to the US have had little impact on product cost, mostly borne by China.

"Certainly the risk of an all-out US-China trade war has increased significantly".

On Friday, Trump said talks with China were going well.

One Chinese trade expert said recent signs of resilience in both economies were breeding over-confidence.

White House officials were unaware on Sunday afternoon whether the tweet would affect those talks.

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