Stock markets took the latest escalation in the trade war between the world’s top two economies in their stride yesterday.
European stocks only briefly turned lower after China retaliated to the latest US sanctions, while Wall Street opened higher, as analysts viewed Beijing’s reaction as being moderate and measured.
China announced yesterday tariffs on US goods worth $60bn in retaliation for President Donald Trump’s decision the previous day to slap duties on $200bn in Chinese products next week.
“If the United States insists on raising tariffs even more, China will respond accordingly,” the finance ministry said in a statement.
Monday’s volley of tariffs from the White House will see $200bn worth of goods taxed at 10% from September 24, going up to 25% from January 1 if the two sides are unable to hammer out a deal.
Trump warned also that another $267bn in tariffs has been lined up if Beijing retaliates.
But Beijing went ahead anyway and announced the new tariffs.
While European markets briefly dropped, they rebounded after Wall Street opened higher, as traders took a sanguine view of the developments.
London’s FTSE 100 closed 0.03% down at 7,300.23 points, Frankfurt’s DAX 30 ended with a 0.5% gain at 12,157.67 points and Paris’ CAC 40 finished 0.3% higher at 5,363.79 points, while the EURO STOXX 50 added 0.3% at 3,355.42 points.
“The more lenient approach from President Trump last night and a measured reaction from Beijing has left traders a little on the optimistic side,” said market analyst David Madden at CMC Markets UK.
“It is almost as if a hurdle has been cleared and investors have one less thing to worry about in the near-term,” he added.
London gave up its gains, but Paris closed 0.3% higher and Frankfurt rose by 0.5%. The Dow was up 0.5% in late morning trade.
Fawad Razaqzada at Forex.com called China’s latest move “measured and not over-aggressive” as the tariff rates it applied were less than it had previously indicated.
“So it looks like China has blinked first, and this puts the US government in a great position to agree on a new trade deal,” added Razaqzada. Consumer tech giant Apple was spared in this round of tariffs, which excluded smartwatches and Bluetooth devices. Apple’s shares were up 0.8% in late morning trading.
“There were investors who’d been thinking a 25% tariff in one go is a possibility,” Shogo Maekawa, a global market strategist with JPMorgan Asset Management, said.
“It could be considered something good in this realm of bad things.”
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