The US-China trade war sharply escalates as the Trump administration announced on Monday that they are imposing another 10% tariffs on USD200 bil. worth of Chinese goods, effective from next week. Stock markets tumbled across the globe yesterday as the Shanghai Stock Exchange Index fell 1.1%, the Hang Seng Index (HSI) lost 1.3%, while the S&P 500 Index slipped 0.6%.

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Tariffs will increase to 25% by year end According to an article on BBC (18 Sept), the 10% tariffs will be effective from Monday next week (24 Sept) and those duties will rise to 25% at the end of the year unless the two countries agree on a deal. The additional tariffs are on top of penalties enacted earlier this year, on USD50 bil. worth of Chinese goods.

In another article on CNBC (18 Sept), Trump warned that they will immediately impose phase three of trade tariffs on approximately USD267 bil. of additional imports, should China take retaliatory action against US farmers or other industries.

According to Trump, the latest round of tariffs are meant to punish China for alleged “unfair trade practices”, including intellectual property theft. China had accused the US of trade bullying and had previously hit back with tariffs on USD50 bil. worth of US products in retaliation, targeting their response against key parts of the president’s political base, such as farmers. China has outlined a plan to impose further tariffs on roughly USD60 bil. worth of US good, and have also threatened other measures.

US and Asian markets declined Yesterday, the Dow Jones Industrial Average fell 0.3% to 26,062.1 points as Apple and Boeing lagged, snapping a four-day winning streak. The S&P 500 Asian was down 0.6% to 2,888.8 points, ending a five-day winning streak, with tech and consumer discretionary underperforming. In Asian markets, the Shanghai Stock Exchange tumbled 1.1% to 2,651.8 points, while the HSI dropped 1.3% to finish below the 27,000 level at 26,932.9 points.

Source: Macquarie Research - 18 Sept 2018