Stocks, commodities consolidate after latest trade war jolt

Beijing described the latest US move as “totally unacceptable” bullying and urged other countries to join China to protect free trade and multilateralism. — Reuters pic

Stocks, commodities consolidate after latest trade war jolt

"It is now much more likely that the dispute will continue for a prolonged period of time and that we will see ratcheting up of protectionist measures", Elena Duggar, an associate managing director at credit rating agency Moody's, said in a research note after the Trump administration late Tuesday surprised investors by threatening to impose 10 percent tariffs on an additional $200 billion of Chinese goods.

On Friday, the US imposed 25-percent tariffs on around $ 34 billion in Chinese goods, sparking an immediate dollar-for-dollar retaliation from Beijing.

The latest round targets hundreds of imports and includes many bicycle products and components including cable casing for derailleurs and caliper brakes, bike tires, rim strips, inner tubes, complete bicycles, frames, steel tubing, forks, wheel rims, wheel spokes, alloy hubs, three-speed hubs, two-speed hubs, freewheel sprockets, brakes and brake parts, saddles, pedals, cranksets and speedometers.

China retaliated against the initial US tariffs with 25 per cent tariffs of its own on $50-billion of USA goods.

One reason why Wall Street is anxious: The People's Republic, which bought $154 billion in USA imports a year ago, is quickly running out of American products to hit with tariffs.

China's government has criticised the latest U.S. threat of a tariff hike as "totally unacceptable" and vowed to retaliate in their escalating trade war. That would leave China only $80 billion for further retaliation. Wednesday's strong flows into the dollar/yen trade continued a trend that began after the United States last week reported decent employment data and a pickup in wages.

Chinese officials are expected to retaliate in other ways, hitting us firms in China with unplanned inspections, delays in approving financial transactions and other administrative headaches.

Instead, its heavily regulated economy gives Beijing tools to disrupt operations for American companies.

Members of Congress are increasingly questioning Trump's tactics.

But Trump has said continuously that China has taken advantage of the United States economy, and he has vowed to hit almost all the country's products with tariffs, as much as $450 billion.

"Tonight's announcement appears reckless and is not a targeted approach", Senate Finance Chairman Orrin Hatch (R-Utah) said in a statement.

Envoys from the two sides last met June 3 when Commerce Secretary Wilbur Ross visited Beijing for talks with Vice Premier Liu He.

Chinese leaders have tried without success to recruit support from Europe and other governments. There is no victor in a trade war. They criticize Trump's tactics but share USA complaints about Beijing's industrial policies.

In financial markets, MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.5 per cent, while the main indexes in Hong Kong and Shanghai fell more than 2 per cent.

Chipmakers, which largely depend on China for their revenue, fell, with the Philadelphia semiconductor index down 2.6 percent.

The conflict is "far from over", warned Hannah Anderson of JP Morgan Asset Management in a report, "and the impact will be global".

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