Published: Mon, May 06, 2019
Finance | By Loren Pratt

Yuan Plunges, U.S. Stock Futures Drop on Trade War: Markets Wrap

Yuan Plunges, U.S. Stock Futures Drop on Trade War: Markets Wrap

"In talks last week in Beijing, Chinese officials told their US counterparts they would not agree to a trade deal that required changes to Chinese law, the people said".

"The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade".

China has retaliated with $110bn-worth of tariffs on USA goods, including agricultural produce such as soya beans, as well as cars, luggage, electronics, housewares and food.

"It would seem reasonable to think the US-EU trade negotiations are going to come from a no less aggressive stance from the White House", one London-based trader told Reuters.

President Donald Trump sent Asian markets plunging Monday after threatening to hike tariffs on $200 billion of Chinese goods at the end of the week in a bid to speed up stuttering trade talks between the economic superpowers.

A second source said Trump's decision to lift the tariff rate on $200 billion of worth of Chinese goods from 10% to 25% from Friday was meant to send a message to Liu not to come to the U.S. with more "empty offers". "The 10% will go up to 25% on Friday", Trump tweeted on Sunday.

More on U.S. -China Trade Talks: Chinese Media Remain Silent as Trump Tweets Rock Stocks, Yuan How U.S.

The roots of the dispute extend to Trump's "America first" project to protect the US' position as the world's leading economy, while encouraging businesses to hire more workers in America and to manufacture their products there.

Trump said "The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!"

It was unclear on Monday whether Chinese Vice Premier Liu He would travel as planned to Washington for talks scheduled to start on Wednesday.

Liu's trip and meeting with United States officials will most likely be more of a message deliverance rather than a detailed discussion so don't expect trade talks to suddenly advance on the back of this week's session.

On oil markets both main contracts were hammered more than two percent by worries that a trade war between the world's top two economies could hit demand for the commodity.

The Shanghai Composite index sank 4.9%, briefly dipping 5% lower, and the Hang Seng in Hong Kong plunged 3.5%.

After Trump's comments, the focus shifted to how China would respond. But US firms in other sectors, including Caterpillar and Apple, have also issued China sales warnings. China announces 10 per cent retaliatory tariffs on US$60 billion of American goods.

However, both USA and worldwide firms have said they are being harmed by the trade war. A problem here is that a pliant Fed would have been a nice thing to have when starting a trade war, as Trump would have surely liked some interest-rate cuts to juice stock prices and offset trade-war-driven losses.

Last week, industry sources said they believed the talks were in the endgame, but a Trump administration official said aides had told the president that significant hurdles remained.

Investors are unsure if Trump is trying to apply more pressure to Beijing to get a deal done quickly, or if he intends to carry through on his threat, market analysts said.

FILE PHOTO: Chinese and U.S. flags are set up for a meeting during a visit by U.S. Secretary of Transportation Elaine Chao at China's Ministry of Transport in Beijing, China April 27, 2018.

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