Trump steps up trade war with China, threatening more tariffs

UPDATE: President Donald Trump has threatened to escalate his trade war with China, by adding tariffs to an additional $US200 billion in imported goods.

The move, announced after financial markets had closed, follows China’s decision to impose tariffs in retaliation to US tariffs set to be imposed on July 6.

“Unfortunately, China has determined that it will raise tariffs on $US50B worth of United States exports,” Mr Trump said.

He directed US trade representative Robert Lighthizer to identify the $US200B more in products for tariffs of 10%.

“If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $US200B of goods,” Mr Trump added.

The Trump administration last week finalised plans for 25% tariffs on $US50 B in imports from China for violation of US intellectual property rights and theft of technology. 

EARLIER
Stocks on Wall Street slid as escalating trade tensions between the US and China continued to weigh on investors’ appetite for risk.

Elsewhere, stocks slumped in Germany as immigration issues threatened the future of Chancellor Angela Merkel’s coalition government. Europe is besieged by thousands of illegal migrants arriving from Africa, the Middle East and Asia.

US-China trade relations plunged as President Donald Trump approved tariffs of 25% on about $US50 billion of Chinese goods on Friday. China responded by announcing taxes on hundreds of US goods to the same value.

Concerns about the fate of the Nafta with Mexico and Canada, and the tariffs on European steel and aluminium products have added to investor anxiety.

“Trade continues to weigh on the market and the China tariffs are a big deal,” CFRA Research investment strategist Lindsey Bell says. “It could get worse before it gets better.”

Analysts at Deutsche Bank estimate the impact of the announced US tariffs on China’s economy would be less than 0.1% of China’s gross domestic product this year. But, if the US imposes further tariffs, as Mr Trump has threatened, the impact would rise to 0.3%.

On Wall Street, the Dow Jones Industrial Average clawed back heavy losses to close 102.94 points, or 0.4%, to 24,987.54. The S&P 500 dropped 0.2% to 2773.87 while the Nasdaq Composite edged up 0.01% to 1691.41.

US government bonds strengthened, with the yield on the benchmark 10-year Treasury note rising to 2.913% from 2.926% on Friday.

Apple buys into China's JD
Alphabet shares rose 1.9% after Google announced it was investing $US550 million in Chinese online retailer JD.com in a move that will deepen its ties with China and ramp up its rivalry with Amazon.

The deal, which gives Google a 1% stake, will help both companies expand their retailing presence. Under the partnership, JD will start selling products on Google Shopping, reaching consumers in the US and Europe as it seeks to diversify beyond China’s highly competitive e-commerce market. Amazon shares rose 0.5%.

Xerox shares fell 0.5% on news Japan’s Fujifilm Holdings will sue for breach of contract and estimated damages of more than $US1 billion after walking away from a planned merger earlier this year.

Xerox reached a truce with activist investors Carl Icahn and Darwin Deason last month to terminate the deal to combine with Fuji Xerox, a joint venture.

Fujifilm alleges Xerox’s action was unlawful and was due to pressure from Messrs Icahn and Deason, who argued the deal undervalued Xerox.

This prevented other shareholders from having a say on the deal, Fujifilm says. “It is inconsistent with shareholder democracy to allow Carl Icahn and Darwin Deason, minority shareholders with only 15% of Xerox’s shares, to dictate the fate of Xerox,” it says.

Audi CEO arrested
Volkswagen shares slumped 2.7% as the chief executive of its Audi brand was arrested and imprisoned without bail in a development of diesel-emissions cheating scandal.

Authorities feared Rupert Stadler would hinder their inquiries, which have about 20 suspects in a broad fraud investigation stemming from the scandal.

In politics, German Chancellor Angela Merkel averted collapse of her coalition government for a couple of weeks after her interior minister Horst Seehofer backed down on a plan she vetoed to start turning back some migrants at the German border. Mr Seehofer is chairman of the Bavarian sister party to her conservative bloc.

Mr Trump, who is facing illegal migrants massing on his own border with Mexico, weighed into the European debate with a tweet that, “The people of Germany are turning against their leadership as migration is rocking the already tenuous Berlin coalition.”

This follows Mrs Merkel’s controversial 2015 decision to open Germany’s borders to hundreds of thousands of asylum seekers from the Middle East and elsewhere.

The arrival of some 1.4 million people over three years has scrambled politics among Europe’s most stable states, boosting support for anti-immigration populists, weakening mainstream parties such as Mrs Merkel’s conservative union.

The Stoxx Europe 600 was down 1%. Germany’s DAX tumbled 1.4%, France’s CAC 40 shed 0.9% and the UK’s FTSE 100 edged down 0.03%.