The United States and China intensified their trade dispute on Monday, as Beijing said it would increase tariffs on nearly $60 billion worth of American goods and the Trump administration detailed plans to tax nearly every sneaker, computer, dress and handbag that China exports to the United States.
The escalation thrust the world’s two largest economies back into confrontation. While President Trump said on Monday that he would meet with China’s president, Xi Jinping, next month in Japan, the stakes are only increasing as the president continues to taunt and threaten China, causing it to retaliate on American businesses.
Stocks fell in response to China’s retaliation as investors fled to safer assets, such as government debt. The S&P 500 dropped 2.4 per cent, its worst day since January 3, while the technology-heavy Nasdaq fell 3.4 per cent, its biggest loss since December 4. The FTSE All World index slid 1.9 per cent to its lowest level since March.
The slide continued in Asia on Tuesday, with stock markets in Japan and South Korea hitting four-months lows in early trading as the Topix fell 2.1 per cent and the Kospi dropped 0.8 per cent. Australia’s S&P/ASX 200 shed 1.2 per cent.
China’s Finance Ministry announced Monday that it was raising tariffs on a wide range of American goods to 20 percent or 25 percent from 10 percent. The increase will affect the roughly $60 billion in American imports already being taxed as retaliation for Mr. Trump’s previous round of tariffs, including beer, wine, swimsuits, shirts and liquefied natural gas exported to China.
Donald Trump defended tariffs as his dogged, often self-contradictory pursuit of a trade war with China put allies and opponents alike in a difficult spot.