According to the news report by Bloomberg, US President Donald Trump’s tweets threatening to increase tariffs on China’s goods once again led to global stock markets plunging today.
In two tweets, Trump stated that he was planning to increase the tariffs placed on Chinese goods from the current 15% to 25% on Friday (May 10).
According to Goldman Sachs Group Inc.’s chief Asia-Pacific economist, Andrew Tilton, trade had been put aside by numerous market participants. He said that market pricing had assumed that the two countries would reach some kind of a deal, and there would not be any other increase in tariffs. Added to that, overall growth outlook had been showing improvements.
However, now, according to Tilton, this tweet by Trump renews the concern that there could be a major hit to growth in tariffs are increased once more. Due to this, the uncertainty associated with such a hit could also impact investments going forward.
According to CMC Markets Asia Pacific Pty’s chief market strategist, Michael McCarthy, this may not be as bad as it currently looks. However, it was likely to unravel all the momentum that the markets have gained in the recent past. He stated that the question now was whether Trump’s tweets were just a last-minute negotiation tactic, or whether it was going to lead to a complete breakdown in trade negotiations between the two countries.
According to MarketWatch, Chinese stocks saw their worst losses in a single session since 2016, and stocks across Asia nosedived after Trump’s tweets were posted. Trumps tweets took Chinese officials by surprise.
However, there is a fear that China could end up withdrawing from the scheduled trade talks due to start on Wednesday in Washington in the US. American officials had given indications that last week’s talks held in Beijing had shown progress and had also stated that there was a possibility of a deal finally being reached by this week.
However, with Trump’s surprise tweets on Sunday, US futures stocks dropped in trading in Asia today, with the Dow Jones Industrial Average futures, the S&P 500 futures and the Nasdaq Composite Index futures all falling by about 2%.
The Shanghai Composite Index was the worst hit, with the index closing trading down by 5.6%. This is the worst one-day plunge since February 2016, when the index fell by 6.4% in one day.
The smaller-cap index, the Shenzhen Composite nosedived by 7.4%, which was also its worst performance since February of 2016. The Hang Seng Index in Hong Kong fell by 2.8% in the same time period.
The Australian S&P/ASX 200 closed trading down 0.8%. The Taiwanese benchmark index was down by 1.8% and the key index in Singapore fell by 3.2%. The Japanese Nikkei and the South Korean Kospi were closed today due to holidays in the two countries.
The Shanghai Composite Index entered trading today after extended market holidays most of last week, and the declines were led by the fall in stocks of shipping and port companies such as China Merchants Energy Shipping Co. and Ningbo Zhoushan Port Co. Both conglomerates saw their stocks fall up to the maximum limit of 10%.
According to Mizuho Bank, Trump’s tweets that if China did not accede to America’s demands could be more of a negotiation tactic. However, stating that tariffs against China was in part responsible for the positive economic results in the US did raise the threat of misguided trade policy from America.
It now remains to be seen how the US markets will react to this move by the US President.