China hit back at Washington’s move to raise tariffs by 20% across the board with higher duties of up to 15% on US farm exports
European and Asian markets took a hit on Tuesday as US President Donald Trump’s new tariffs came into effect, prompting China to retaliate with increased duties on American agricultural exports.
The German DAX fell 1.8% to 22,733.26, while Paris’ CAC 40 dipped by 1.1% to 8,108.71. Over in the UK, the FTSE 100 saw a decline of 0.4%, landing at 8,837.92.
Futures painted a mixed picture for the US., with the S&P 500 nudging up by 0.1% and the Dow Jones Industrial Average remaining steady. In Asia, Tokyo’s Nikkei 225 took a 1.2% tumble to 37,331.18, and Hong Kong’s Hang Seng index dropped 0.4% to 22,922.16. The Shanghai Composite bucked the trend slightly with a modest gain of 0.2%, reaching 3,324.21.
South Korea’s Kospi lost 0.2% closing at 2,528.92, Taiwan’s Taiex declined by 0.7%, and Bangkok’s SET was down by 1.1%. Monday had already seen a downturn in the U.S. market, with the S&P 500 falling 1.8% after Mr Trump declared “no room left” for negotiations that might ease the newly effective tariffs on imports from Canada and Mexico, despite a previous delay for further talks.
The Dow Jones suffered a 1.5% drop, and the Nasdaq composite plunged 2.6%. Francis Lun, CEO of Geo Securities in Hong Kong, commented on the escalating trade tensions, saying: “I don’t think China will buy any more US farm products. The orders will go to South America. I think all in all, it’s a lose-lose situation. Nobody gains anything.”
Investors had been optimistic that Mr Trump would opt for a less disruptive approach to global trade. Monday’s downturn reduced the S&P 500’s increase since Election Day to just over 1%, down from a high of more than 6%.
This rally was largely fuelled by hopes for Trump’s policies that would bolster the US economy and businesses. After the S&P 500 reached a record last month, buoyed by a series of better-than-expected profit reports from major US companies, the market took a dive following weaker-than-anticipated reports on the US economy.
These included several indicating that US households are becoming increasingly pessimistic about inflation due to the tariff threat. The most recent such report arrived on Monday regarding US manufacturing. Overall activity is still on the rise, but not as much as economists had predicted. Manufacturers are witnessing a decline in new orders.
Prices, on the other hand, increased amid debates over who will foot the bill for Trump’s tariffs. The market’s recent downturn has particularly impacted Nvidia and other previously high-performing sectors of the market.
They suffered further losses on Monday, with Nvidia down 8.8% and Elon Musk’s Tesla down 2.8%. In other early Tuesday transactions, US benchmark crude oil dropped 93 cents to $67.44 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude fell by $1.10 to $70.52 per barrel.
The US dollar weakened to 149.86 Japanese yen from 149.50 yen. The euro strengthened to $1.0519 from $1.0488. Bitcoin experienced a significant drop, plunging 8.7% to approximately $83,900, as per CoinDesk’s data.