There has been a drastic fall in stock markets across the globe in the wake of President Trump’s recent threats of tariffs to China. The recent announcement of Mr. Trump on putting duties on Chinese goods has raised fears of a trade war. Last week, the US President confirmed that the Us would proceed with its imposition of 25 percent tariffs on Chinese goods worth $50bn.
Beijing responded by announcing that it would impose a similar tax on 659 US products also worth $50bn and that includes agricultural and marine products as well as cars. The president added that if China increases the tariffs again, they will also include more tariffs on other goods worth$200bn.
The president asserts that the imposition of tariffs to China will proceed if the latter does not change her practices.Mr. Trump criticized the unfair practices of China concerning the acquisition of American intellectual property as well as technology. He says that China has refused to change the practices and opted to threaten US companies, employees and farmers who are not to blame.
The markets have reacted poorly with China’s Shanghai Composite performing the worst in Asia as it ended the day down 3.8 percent. The impact has also been felt in Europe where Germany’s Dax index hit a down of 1.2 percent while France’s Cac 40 was down to 1.1 percent. London’s FTSE 100 closed the day with a fall of 27 points or 0.36 percent.
As the dispute between China and the US proceeds, Russia has responded by announcing that it will also impose tariffs on particular American goods. The economy minister of Russia, Maxim Oreshkin says that the Tariffs will target products which the Russians have domestic equivalents.
A paper published by the Canadian CD Howe Institute indicates that Mr. Trump’s threats are affecting the US manufacturing sector by making use of uncertainty as a trade protection tool. Additionally, Liam Fox, the UK’s international trade secretary has called on nations to deter from using tariffs and other similar measures as the first response when faced by trade disputes.
Acting tough with China resonates with many of Mr. Trump’s supporters’ mainly because he is looking forward to the November congressional elections. Additionally, the US president could be thinking that China will soon run out of US imports.
However, there is a potential risk for Mr. Trump because Republicans who believe in the free trade do not think that this is the best way of handling problems with China. Also, as the president increases the range of goods that are subject to tariffs, it becomes challenging for both the American importers and consumers alike to avoid the cost by seeking alternative suppliers.