There is a growing nervousness amongst investors since the window of opportunity of avoiding a trade war is rapidly closing.
On Friday, with media reports stating that U.S. President is set to impose “pretty significant” tariffs against China, shares across Asian markets wobbled with investors bracing themselves for a potential trade war.
Trump stated the U.S. will unveil a list which targets Chinese goods worth $50 billion with Beijing warning that it was ready to reciprocate in the same manner.
Although it is not clear when Trump will activate the potential measure, rising U.S.-China trade tensions have placed additional pressures on the Chinese economy which is showing signs of cooling under the weight of a multi-year crackdown on risky lending practices.
According to analysts, Trump’s announcement is unlikely to be a total surprise to financial markets since the potential list was released by Washington a couple of months back. Nevertheless, investors are worried since the window for avoiding a trade war is fast closing.
“The implementation of tariffs on China is one of several fronts that the U.S. is battling on the issue of trade,” said Tai Hui, chief APAC market strategist at JPMorgan Asset Management, in reference to the Trump administration’s stance on Canada and Europe. “This battleground could potentially expand into the auto sector given the U.S. investigation into auto imports. This is likely to weigh on market sentiment over the summer.”
“The ECB has made it clear that it does not want quick rate hikes, although it now considers progress towards the inflation target as ‘substantial’. Against the background of uncertainties in the world today – such as trade – this makes sense, as does the emphasis on data dependency,” said Stefan Kreuzkamp, chief investment officer at DWS.
On Wall Street however,, tech stocks on the S&P 500 benchmark index rose higher.
One of the reasons U.S. equities rose was the U.S. Commerce Department’s report which showed retail sales rising more than expected in May – the latest indication of an accelerating U.S. economy.