Asian stocks extended a global downturn on Tuesday, while the safe-haven yen rose as U.S. President Donald Trump threatened new tariffs on Chinese goods in an escalating tit-for-tat trade war between the world's two biggest economies that has rattled financial markets.
Analysts also say the direct impact of the tariffs may be limited, especially for the USA economy, which is in decent shape.
The Trump administration last week finalized plans to slap tariffs on $50 billion in imports from China, accusing Beijing of violating USA intellectual property rights and stealing American firms' technology. The tariffs were the result of an investigation by Commerce Department into the theft of U.S. intellectual property by Chinese companies.
China is the main perpetrator.
The Trump tariffs, which the USA government says are punishment for intellectual property theft, will be enacted in two waves.
He directed Trade Representative Robert Lighthizer to identify $200 billion worth of Chinese goods for additional 10% tariffs, which would be enacted "if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced".
China said it would retaliate immediately by slapping duties on American export products, including crude oil, and suspend all previous trade agreements with Trump's administration.
"This all shows how quickly trade tensions could escalate between the US and China", said Derek Halpenny, European head of global markets research at MUFG Bank.
"Chinese leaders over these past few weeks have been claiming openness and globalization". He added that China is a "predatory economic government" that is "long overdue in being tackled", matters that include IP theft and Chinese steel and aluminium flooding the USA market. At the same time, farmers in China are being encouraged to plant more soy, apparently to help make up for any shortfall from the U.S.
Over the past six months, the United States has exported an average 363,000 bpd of crude oil to China, which along with Canada is the biggest buyer of USA crude. So far the tariffs aimed at China through a trade law known as Section 301 have been developed with opportunities for public comment and hearings in Washington.
"I have an excellent relationship with President Xi (Jinping), and we will continue working together on many issues".
More than 800 exports, about $34 billion worth, will be subject to tariffs starting July 6. China, claiming the United States had "launched a trade war," retaliated nearly immediately, outlining its own tariffs on USA goods worth $50 billion. And Trump promised to levy tariffs on a further $200 billion in Chinese goods if Beijing responds to today's action.
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