The Times view on China-US relations: Bad Trade

The Times view on China-US relations: Bad Trade”

The escalation in trade tensions weighed on stocks and commodities, and led to widespread buying in perceived safe haven assets such as U.S. treasuries, gold and the Japanese yen and Swiss franc.

NAB was down 4.68 per cent to $24.24, Commonwealth was down 1.27 per cent to $72.57, ANZ was down 1.25 per cent to $26.10 and Westpac was down 0.81 per cent to $26.90.

The Shanghai Composite Index lost 0.7% and the blue chip CSI 300 was 0.6% lower on Tuesday.

U.S. President Donald Trump on Tuesday defended his trade war with China as tensions escalated and markets extended their losses, promising a deal with Chinese President Xi Jinping soon, even as fears escalated about a protracted battle.

Japan's Nikkei stock index fell to its lowest since mid-February.

On Monday, the Dow closed 617 points down (2.4% drop).

UBS economists said they believed Beijing might raise tariffs on $60 billion of USA goods and cancel an agreement to postpone a duty increase on imported American autos while the two sides negotiated.

The retaliation measure came three days after the United States moved to increase tariffs on US$200 billion worth of Chinese goods from 10% to 25% as of May 10.

In an interview with CTV News Washington Bureau Chief Joy Malbon, economist Douglas Holtz-Eakin said that the right to try to pressure China into "behaving better" when it comes to things like currency manipulation and intellectual property. Among more than 6,000 tariffed items on the previous 200 billion US dollars list are 1,150 items on which the over 50 percent dependent on Chinese imports, according to Chinese Academy of International Trade and Economic Cooperation.

"The measure taken by the USA escalated trade frictions and violated the consensus reached by both sides to tackle trade disputes through consultations", the authorities said in a statement issued by the Customs Tariff Commission of the State Council.

The Dow and S&P 500 index each fell more than 2% as investors sold trade-sensitive shares in a broad sell-off that extended the market's slide into a second week.

It is Trump's latest twitter attack on China in the ongoing tit-for-tat tariff war between the world's two largest economies.

The Chinese response was announced soon after Trump warned Beijing not to retaliate.

But Beijing appeared to dig in.

For months, as American and Chinese officials faced off at the negotiating table, China's media downplayed the trade tensions.

"Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically".

On Friday, Trump raised tariffs on $200 billion of Chinese goods, from 10 per cent to 25 per cent.

Beijing is the biggest holder of U.S. debt, and Bloomberg News estimated a year ago that the Chinese state held around $1.2 trillion's worth.

"I assume so. It's a good investment", he said, adding that no date had yet been set for a further round of negotiations to be held in Beijing.

Senate Finance Committee Chairman Chuck Grassley, Iowa Republican, implored both countries to strike a deal.

The UBS analysts said the next escalation could come in as little as one month as USA regulators prepare to follow through on Trump's threat to extend penalty tariffs to all Chinese goods.

These measures "will get a lot of support in China, but will further undermine business confidence" overseas, said Jake Parker from the US-China Business Council.

In a previous round of tit-for-tat moves, the United States imposed 10 percent tariffs on $200 billion worth of Chinese imports in September.

As the trade dispute extends, investors expect tariffs to increase corporate costs, lower profit margins and hinder the ability of companies to plan or make capital expenditures.

Trump says these taxes on U.S. companies are actually helping the U.S. GDP.

"The two presidents maintain contact through various means", the Chinese foreign ministry spokesman said, without confirming a possible meeting between the two leaders.

"These retaliatory tariffs from China could not come at a worse time for family farmers and ranchers, who are already coping with depressed commodity prices, environmental disasters, and chronic oversupply", Johnson told Newsweek in an emailed statement. 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.

China will slap import surcharges on 5,140 USA products starting on June 1, with levies of 25 per cent on agricultural products such as honey, vegetables, coffee and various meats.

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