Trump hits China with more tariffs, says Xi moving too slow on trade

Moody’s said the new tariffs would weigh on the global economy at a time when growth is already slowing in the United States, China and the euro zone

International News: US President Donald Trump said he plans to impose a 10 per cent tariff on $300 billion of Chinese imports from September 1 and could raise tariffs further if China’s President Xi Jinping fails to move more quickly to strike a trade deal.

The announcement on Thursday extends Trump’s trade tariffs to nearly all China’s imports into the United States and marks an abrupt end to a temporary truce in a trade war that has disrupted global supply chains and roiled financial markets. “I think President Xi … wants to make a deal, but frankly, he’s not going fast enough,” Trump said.

Trump made the announcement in a series of Twitter posts after his top trade negotiators briefed him on a lack of progress in US-China trade war talks in Shanghai this week. Trump later said if trade negotiations fail to progress he could raise tariffs further – even beyond the 25 per cent levy he has already imposed on $250 billion of imports from China. The news hit US financial markets hard.

Oil prices plummeted 7 per cent, with Brent crude registering the biggest daily percentage drop since February 2016. The benchmark S&P 500, which had been in solidly positive territory on Thursday afternoon, closed down 0.9 per cent. Benchmark US Treasury yields also fell. Retail associations predicted a spike in consumer prices. Target Corp tumbled 4.2 per cent, Macy’s Inc fell 6 per cent and Nordstrom Inc was down 6.2 per cent.

Recession may begin in 9 months if trade war gets any worse: Morgan Stanley

A recession could begin in as soon as nine months if President Donald Trump pushes to impose 25% tariffs on an additional $300 billion of Chinese exports and China retaliates, warns Morgan Stanley

Investors may still be underestimating the full risk to the global economy from a trade war, even after US stocks capped the worst month of the year. A recession could begin in as soon as nine months if President Donald Trump pushes to impose 25% tariffs on an additional $300 billion of Chinese exports and China retaliates with its own countermeasures, according to Chetan Ahya, chief economist and global head of economics at Morgan Stanley.

“My recent conversations with investors have reinforced the sense that markets are underestimating the impact of trade tensions,” Ahya wrote in a note. “Investors are generally of the view that the trade dispute could drag on for longer, but they appear to be overlooking its potential impact on the global macro outlook.”

That was followed by a warning from Goldman Sachs Group Inc., which now expects the US to impose 10% tariffs on the remaining $300 billion worth of imports from China and on all Mexican goods too. The bank lowered its US second half growth forecast by about half a percentage point to 2% and has sharply raised its subjective probabilities for rate cuts by the Federal Reserve.

“But while it is a close call, the outlook has not yet changed enough for cuts to become our baseline forecast,” Goldman analysts led by Chief Economist Jan Hatzius said in a note. The rift between the Trump administration and China has escalated as each side blames the other for the breakdown in talks. Over the weekend, Trump celebrated his trade policies and the recent move to impose tariffs on Mexican goods in response to illegal immigration. Trade tensions between the US and European Union are also simmering.

China issued a White Paper on Sunday that said the escalating trade war between the world’s two largest economies hasn’t “made America great again.” Instead, the paper argued that Trump’s trade policies have hurt the US economy by increasing production costs, causing prices hikes, damaging growth and people’s livelihoods and creating barriers to US exports to China..

Read More: International News