Worldwide and domestic impact of USA tariffs on Chinese imports

Lloyd Doyle
July 11, 2018

WTO spokesman Dan Pruzin has cited concerns expressed on Twitter by WTO Director-General Roberto Azevedo about new "restrictive measures" before 25-percent US tariffs on $34 billion worth of Chinese imports took effect.

After a wobbly start, US stocks mounted a broad rally, shaking off two consecutive weekly losses.

On the worldwide front, there were numerous developments aside from trade war rhetoric that noticeably impacted global financial markets.

All three major US indexes have been in the red since Tuesday; the S&P 500 extended the decline in the shortened session on Wednesday while Nasdaq and Dow were closed due to Independence Day holiday.

Forecasters say a full-blown conflict could knock up to 0.5 percent off global economic growth through 2020 if Washington and Beijing impose tariff hikes on $250 billion of each other's goods.

Two of the largest economies in the world have descended into a trade war, after China followed up on its threat to retaliate against the $34bn (£25.7bn) United States tariffs.

The yuan dropped more than 3 per cent against the dollar in June, more than in any other month since 1994, when China unified the market exchange rate.

China's foreign ministry says retaliatory tariffs on US goods "took effect immediately" after Washington raised import duties on billions of dollars of Chinese goods. But that would only be a few companies or sectors.

"From China's perspective, this is an unacceptable foreign assault that they will resist at all costs", said Levy, who was a trade adviser in President George W. Bush's White House.

"The U.S. has provoked this trade war".

Trump enraged such USA allies as Canada, Mexico and the European Union this spring by slapping tariffs on their steel and aluminum shipments to the United States.

Tariffs also are meant to increase the price of imports or to punish foreign countries for committing unfair trade practices, like subsidizing their exporters and dumping their products at unfairly low prices.

"John Heisdorffer, an Iowa soybean farmer and president of the ASA, warned of the impact of the tariffs on farmers". Together with imports from Brazil, this could offer China a new and long-term supply of soy, pushing USA producers to the sidelines.

"The market is counting on this to subside", said Erik Davidson, chief investment officer at Wells Fargo Private Bank. Trade wars will continue to be the primary focal point of the markets as they are likely to heat up until they reach a boiling point. "And the impact on USA business, in my estimation, will be substantial". Markets have been watching to see if tight labor market conditions would force wages higher, a sign of inflation.

He said: "It is an infernal logic, a risky logic, a logic that is in nobody's interest, starting with the U.S".

Health care stocks posted the biggest gains, led by Biogen.

That will take some sting out of the tariffs, of course, but when you need to buy a new thermostat or sedan you need to buy one and if your product isn't exempted, you're out of luck. From 1790 to 1860, for example, they produced 90 percent of federal revenue, according to "Clashing Over Commerce: A History of US Trade Policy" by Douglas Irwin, an economist at Dartmouth College.

US crude oil prices reversed an early slide. Brent crude was also 0.2 percent higher at $77.52 per barrel.

Bond prices rose. The yield on the 10-year Treasury fell to 2.82 percent from 2.83 percent late Thursday.

The dollar changed hands at 110.56 yen. The euro rose to $1.1698 from $1.1641. Spot gold traded at $1257.63 per ounce. Tokyo's Nikkei 225 jumped 1.1 percent after a four-day losing streak.

Other reports by Iphone Fresh

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