Asian equities slumped after US President Donald Trump threatened to hike import tariffs on $200bn Chinese products as early as this Friday from 10% to 25%. The Chinese index Shanghai Composite crashed 5%, Hong Kong’s Hang Seng and Singapore’s Strait Times suffered cuts of more than 3%. India’s Nifty closed with a loss of 114 points and the Sensex shed 363 points. Metals and Media stocks were the biggest losers today. Most European indices are trading with cuts of nearly 2%.
Over the weekend US President Donal Trump tweeted
For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars….
— Donald J. Trump (@realDonaldTrump) May 5, 2019
….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!
— Donald J. Trump (@realDonaldTrump) May 5, 2019
The US and China have been in talks for months now to renegotiate tariffs after the trade war erupted in September 2018 with no breakthrough so far. US had slapped tariffs on US$250 billion worth of Chinese products and has threatened tariffs on US$325 billion more. China, for its part, has set tariffs on US$110 billion worth of US goods.
In April this year The IMF lowered its growth forecast for 2019 to 3.3 percent from the previous level of 3.5 percent, the lowest since the financial crisis citing risks including the trade war. Many analysts have warned that US may slide into a recession if the trade war is prolonged. Higher import prices of good from China have not impacted US inflation significantly with the US Central Bank choosing to halt its interest rate hiking program. The recent employment data released on Friday has shown. that job addition to American economy has remained solid. In April 263,000 new jobs were added to US economy and the unemployment rate fell to 3.6 percent, the lowest in 50 years.
China’s economy expanded at a 6.6 percent rate last year, the slowest rate of expansion since 1990. The IMF expects China’s growth to slow further to 6.3 percent this year.