Economy

China to impose tariffs on $60 billion of USA goods

China to impose tariffs on $60 billion of USA goods”

Donald Trump is now willing to put Wall Street at risk if it means winning over Main Street. In terms of the trade war itself, negotiations will continue as China will press for a win-win agreement in spite of the fact that Trump has publically claimed that he enjoys the gamesmanship element of the trade war. Chipmakers were among the biggest decliners. Apple also took heavy losses, tumbling 5.8%.

Bank of America strategist Athanasios Vamvakidis said: "This is a clear escalation of trade tensions in our view, and against our baseline that cool heads would prevail and the worst would be avoided".

In the short term, the US insistence on a protectionist mentality will highlight the importance of the Belt and Road Initiative (BRI) to Asian, Latin American and African countries.

The Dow dove 617.38 points, or 2.4%, to 25,324.99. "China trade negotiations and concern that it's really deteriorating pretty significantly and that's impacting all areas of markets", said Kristina Hooper, chief global market strategist at Invesco in NY. The broad index is still up 14.9% for the year.

China's finance ministry said it plans to set import tariffs ranging from 5 percent to 25 percent on a target list worth about $60 billion. It is the threat to impose tariffs on the $300 billion or so remaining imports from China that cause the greatest concerns. The United States announced last week it would increase tariffs on US$200-billion of Chinese imports. The price of soybeans slid 0.8% to $8.04 a bushel.

In the US, decades of regulatory burdens that reached new heights after 2008 have been slashed by Trump.

Analysts have said investors should prepare for a more volatile stock market while the trade dispute deepens. "Both sides will pay in these things".

"Investors are trying to figure out how much of the rally that we had this year was perhaps celebrating prematurely hopes of a trade deal". Chipmakers Microchip Technology dropped 6.3% and Advanced Micro Devices lost 6.2%.

Some of the biggest chipmakers in the US lean heavily on China for their sales, making them particularly vulnerable to the worsening tensions between the two countries.

President Donald Trump said on Twitter over the weekend that "We are right where we want to be with China".

Bank stocks also fell sharply. Eastern Time. Boeing and Caterpillar fell the most in the Dow. The yield on the 10-year Treasury fell to 2.39% from 2.45% late Friday.

Taking into account all current tariffs, and all threatened tariffs - from both the U.S. and foreign countries - the Tax Foundation found that long-run U.S. GDP would be reduced by 0.75 percent - or $187.9 billion - offsetting almost 50 percent of the benefits that the group expected to result from the Tax Cuts and Jobs Act.

Investors have so far made it through the bulk of first quarter corporate earnings reports in decent shape. The results so far show less than a 1% drop in profit.

Elsewhere in the market, generic drug developers are sinking after many of them were accused of artificially inflating and manipulating prices. The lawsuit from attorneys general in more than 40 states alleges that for many years the makers of generic drugs worked together to fix prices.

Teva, which was specifically mentioned, sank 14.8%. The stock had priced at $45 at its initial public offering. It closed at $37.10. Gold, however, bucked that trend as it reacted as a safe haven asset and gained 1%, a total of $12.90 and is now fixed at $1300.40 an ounce.

Energy futures finished mostly lower.

That could all change if a U.S. Brent crude, the worldwide standard, gained 24 cents to $70.86 per barrel.



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