By Joyce Yu
Philadelphia, PA–China strikes back with sanctions including tariffs on about $3 billion worth of US imports with effect from Monday, hitting 128 products ranging from pork to steel pipes. This move has promoted some economists to worry about the growth prospect of the global economy. Nobel Prize-winning economist Robert Shiller said, following China’s first threat of tariffs on 128 products, that uncertainty about tit-for-tat trade measures could result in an “economic crisis.”
He told CNBC, “It’s just chaos: It will slow down development in the future if people think that this kind of thing is likely.”
The statement released over the past weekend says China’s Customs Tariff Commission is increasing the tariff rate on eight other products, including pork and recycled aluminum by 25%. It’s also imposing a new 15% tariff on 120 other imported U.S. commodities, such as fruits, nuts, wine and steel pipes. China is the No. 3 market for U.S. pork, importing $1.1 billion in products.
Given the size of the bilateral trading relationship, the $3 billion in U.S. imports, however, seems less significant. Official data shows U.S. goods exported to China in 2016 totaled $115.6 billion. What is noteworthy is that China’s trade retaliation is a response to President Donald Trump’s tariffs on imports of steel and aluminum from China and some other countries, but not against his announcement in March that the US is planning new tariffs on up to $60 billion in Chinese imports, suggesting that Beijing may be saving stronger retaliatory measures for later.
Over to the stocks market, today marks the first trading day of the second quarter. Three major indexes slumped 2% at open after the Dow losing more than 2% in the first quarter, making it the worst performance since 2015. While investors are looking for a smoother ride in the Q2, this seems simply unlikely as the ongoing Sino-US trade war is expected to weight on the market.
“Trade dispute will continue to dominate investors’ decisions heading into the second quarter,” said Hussein Sayed, Chief Market Strategist at FXTM. Paul Ciana, global chief FICC technical strategist at Bank of America Merrill Lynch, says the market’s “headed right in the eye of the storm.””Enjoy the little bit of calm in the middle of the storm, and get ready to hunker down as Q2 is probably going to be a bit more similar to Q1,” he added.
