Tariff Bomb Drops
Boom! That’s the sound of 25% tariffs landing on over $200bn worth of Chinese goods as President Trump turns words into action after almost a year of threats. Scary stuff.
It’s a big day for global markets as the months of trade war negotiations finally dissolve without a breakthrough, resulting in more than double the original 10% tariff structure coming into effect. As the final day of negotiations between Robert Lighthizer and Vice Premier Liu He comes into focus, tension in the global markets will be at an all time high.
Even though tariff hikes won’t hit goods that have already left Chinese ports, it gives negotiators a mere 3-4 weeks to hash out a deal, which at this stage looks more challenging than ever. China’s commerce ministry issued a statement saying it “deeply regretted” this latest move, vowing to “take necessary countermeasures”.
What that means remains a mystery for now, but there are a number of powerful economic tools China has at its disposal outside of a tit-for-tat tariff retaliation, such as dumping US treasuries. Despite the elevated tensions, Asian stocks opened higher this morning with China’s benchmark index (CSI 300) bouncing 3.63% in response to the news.
It seems investors had already priced in the imposition of tariffs and the CSI 300’s 15% slide has all the makings of a correction in the overall bull trend. So grab some popcorn and get comfy, because the next few weeks will be a show you don’t want to miss.
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