The specter of a rising trade war and heightened tensions between the U.S. and China instilled fear among investors resulting in a drop in the global stock markets on Friday.
While London’s FTSE 100 shed fell by 0.7% Germany’s DAX and France’s CAC 40 fell 1% in early trading.
Asia saw much higher loses. While there was a 2.5% drop in Hong Kong’s Hang Seng at its closure, a 3.4% was lost by the Shanghai Composite and 45% was shed by Japan’s Nikkei.
After the outcome of a seven-month old investigation on alleged intellectual property thefts by China held U.S. as the victim, U.S. President Donald Trump instructed the US trade representative to slap new tariffs on approximately $60 billion worth of goods imported into the U.S. which was the source of the bad trading session on Friday.
And within a few hours, there was retaliatory action by China who announced plans for tariff imposition on some U.S. goods imported by it. Plans of targeting about$3 billion worth of U.S. imports into China was announced by the country’s Commerce Ministry on Friday. The products range from pork to steel pipes
Legal action would be pursued by both against each other at the world Trade Organization, said U.S and China – the two largest economies of the world.
“China does not want a trade war, but China is not afraid of a trade war. We are confident in our capability to face up to any challenge,” the ministry said.
Trump’s announcement on Thursday had also negatively impacted the Wall Street which was also one of the factors for Friday’s bad performance of the rest global markets. While the S&P 500 shed 2.5% and the Nasdaq 2.4%, the Dow dropped by 724 points, or 2.9%,
Jingyi Pan, a Singapore-based market strategist at broker IG Group, said that the White House’s latest trade sanctions has resulted in the Asian stock markets “feeling the fire and fury” of the decision. And further, the region’s stocks were thrown “into a state of turmoil” by China’s swift retaliation.
Some companies were more impacted than others by this tit for tat measure. In Hong Kong trading, there was a fall of as much as 10% in the shares of WH Group because the company is engaged in exporting of pork to China after it imports it from the U.S.
And this rising environment of a trade war between the two largest economies would cause continued jitters among investors for some time warned form experts.
“One should not rule out that possibility that we are at the start of a long-drawn trade dispute,” Pan said.
(Adapted from Money.CNN.com)