Hong Kong (AFP) – Equities tumbled on Wednesday after US President Donald Trump ramped up his trade war by hitting China with tariffs of more than 100 percent and sweeping measures against dozens of trading partners came into effect. After a brief respite on Tuesday, investors were once again panicking amid fears that Trump’s blow to commerce will spark a global recession. India and New Zealand’s central banks cut interest rates to shore up their economies, while speculation that Beijing will unveil stimulus measures helped Shanghai and Hong Kong stocks buck the downward trend.
China and the United States were headed for a vicious standoff after Trump threatened fresh tariffs of 50 percent in response to Beijing’s retaliation in kind to his initial 34 percent duty announced last week. With China already subject to a 20 percent toll, its exporters are now facing tariffs of up to 104 percent. Beijing has blasted what it called US blackmail and vowed to “fight it to the end,” fanning worries that the crisis could spiral out of control. After the levies kicked in on Wednesday, Beijing’s commerce ministry warned that China had “firm will and abundant means” to fight a trade war, state news agency Xinhua said.
Forex markets were rattled — Beijing has allowed the yuan to weaken to a record low against the dollar, while the Indonesian rupiah was also at an all-time nadir. The South Korean won also hit its weakest since 2009 during the global financial crisis. Meanwhile, the European Union could unveil its response to the tariffs next week. French President Emmanuel Macron has called for Washington to reconsider but said that if the bloc was forced to retaliate, “so be it.” In response to steel and aluminium levies that took effect last month, Brussels is planning measures of up to 25 percent on US goods ranging from soybeans to motorcycles, according to a document seen by AFP.
Chinese Premier Li Qiang told EU chief Ursula von der Leyen that Beijing had the “tools” to handle headwinds, according to state news agency Xinhua. South Korea unveiled a $2 billion emergency support for its crucial export-focused carmakers, warning that Trump’s 25 percent tariffs on the sector could deal a terrible blow. And the Association of Southeast Asian Nations (ASEAN) said it must “act boldly” to accelerate regional integration. Members of the bloc — which counts the United States as their main export market — were among those slapped with the toughest levies.
“Any illusion of calm in Asia just got nuked. Trump’s latest tariff tantrum hits like a macro wrecking ball, torching what was left of risk appetite and plunging markets back into full-blown panic mode,” said Stephen Innes at SPI Asset Management. “The only question on every desk this morning is: Is he really willing to light a global recession match just to redraw the trade map?” Trump believes his policy will revive the country’s lost manufacturing base by forcing companies to relocate to the United States, saying on Tuesday that countries were “dying to make a deal.” Earlier he said the country was “taking in almost $2 billion a day” from tariffs, but the measures have sent shockwaves through markets and wiped trillions of dollars off company valuations.
Jack Ablin of Cresset Capital estimated that the market now sees a greater than 50 percent chance of a US recession. The gains in Asia and Europe on Tuesday came on optimism that the White House could be open to compromise. But a lack of movement and Trump’s confirmation of the 50 percent duties on China took the air out of investor sentiment. That saw Wall Street reverse healthy opening gains to end deep in the red — the S&P 500 finished below 5,000 points for the first time in almost a year.
Asia and Europe resumed their retreat Wednesday but pared early big losses. Tokyo fell four percent as the safe-haven yen rose more than one percent, while Taipei cratered almost six percent. Singapore, Sydney, and Seoul dropped more than one percent, while Wellington, Mumbai, and Jakarta also faced losses. London, Paris, and Frankfurt tumbled, with pharmaceutical firms taking a heavy hit after Trump said he would be announcing a major levy on the sector. Weight-loss drug maker Novo Nordisk dived more than seven percent and AstraZeneca shed six percent.
Shanghai rose amid speculation that state-backed funds were propping the market up and the government would unveil fresh stimulus, while Hong Kong also rallied thanks to an afternoon bounce. Oil prices lost more than two percent, with both main contracts sitting around four-year lows amid growing fears that the hit to economies will batter demand.
– Key figures around 0810 GMT –
Tokyo – Nikkei 225: DOWN 3.9 percent at 31,714.03 (close)
Hong Kong – Hang Seng Index: UP 0.7 percent at 20,264.49 (close)
Shanghai – Composite: UP 1.3 percent at 3,186.81 (close)
London – FTSE 100: DOWN 1.6 percent at 7,785.58
Dollar/yen: DOWN at 144.70 yen from 146.23 yen on Tuesday
Euro/dollar: UP at $1.1085 from $1.0959
Pound/dollar: UP at $1.2860 from $1.2766
Euro/pound: UP at 86.20 pence from 85.78 pence
West Texas Intermediate: DOWN 2.3 percent at $58.23 per barrel
Brent North Sea Crude: DOWN 2.2 percent at $61.42 per barrel
New York – Dow: DOWN 0.8 percent at 37,645.59 (close)
© 2024 AFP
