Asian markets hit by fears of new Trump tariffs on China

Investors have been spooked by reports that Donald Trump is considering imposing tariffs on another $200 billion of Chinese imports (AFP pic)

HONG KONG: Asian markets sank on Monday following reports that Donald Trump is planning to hit China with another round of tariffs, dealing a blow to hopes for talks between the two economic giants.

Traders sent regional equities surging on Thursday and Friday as it emerged that Treasury Secretary Steven Mnuchin had offered to meet officials from Beijing to avert an all-out trade war.

However, The Washington Post and Wall Street Journal said the president had decided to impose 10% levies on $200 billion of Chinese imports and could make an announcement in the coming days.

That would come on top of the US$50 billion already announced over the summer and would account for about half of China’s exports to the United States. Beijing has threatened to retaliate against any measures.

“Whether this is little more than the president using this leverage as a negotiating tactic, China officials will continue to be frustrated,” said Stephen Innes, head of Asia-Pacific trading at OANDA.

“This good cop bad cop routine continues to undermine Mr Mnuchin’s efforts as it’s still not clear if anyone other the Trump himself is commissioned to cut a deal. And not too unexpectedly, and quite ominously, China could cancel the meeting.”

Timing important

Hong Kong led losses Monday, dropping 1.3% while Shanghai ended 1.1% off. Seoul and Singapore each lost 0.7%, while Taipei, Jakarta and Mumbai also saw deep losses. Sydney edged 0.3% higher.

Tokyo was closed for a public holiday.

In early European trade London and Paris each fell 0.1%, while Frankfurt shed 0.5%.

But while investors were in a selling mood, some positives could be taken from reports that Trump was considering 10% tariffs instead of the feared 25%, said JP Morgan Asset Management global market strategist Kerry Craig.

“No more tariffs would still be the best outcome for the markets but with the US administration seemingly wanting to pursue its long term strategic agenda against China, that’s unlikely to be the case, especially as there is little in the way of pain being felt by the US economy or equity market,” he said.

“Timing is also important when it comes to enacting any new tariffs. A staggered implementation is being the viewed as the best of a bad situation.”

On foreign exchanges, emerging market currencies continue to struggle as investors fret over a possible spillover from financial crises in Argentina, Turkey and South Africa.

The Indian rupee was hovering around 72.53 to the dollar, near record lows, while the Indonesian rupiah is near a 20-year trough.

Other high-yielding units were also down, with South Korea’s won 0.9% lower and the Mexican peso shed 0.5%.

Key figures around 0810 GMT

Hong Kong – Hang Seng: DOWN 1.3% at 26,932.85 (close)

Shanghai – Composite: DOWN 1.1% at 2,651.79 (close)

Tokyo – Nikkei 225: Closed for a public holiday

London – FTSE 100: DOWN 0.1% at 7,297.58

Euro/dollar: UP at $1.1633 from $1.1627 at 2030 GMT on Friday

Pound/dollar: UP at $1.3083 from $1.3069

Dollar/yen: DOWN at 111.93 yen from 112.00 yen

Oil – West Texas Intermediate: UP 28 cents at US$69.27 per barrel

Oil – Brent Crude: UP 25 cents at US$78.34 per barrel

New York – Dow Jones: FLAT at 26,154.67 (close)