US Stocks Tank Amid Trade War, Inflation Worries

Trump US lost trade war with China years ago

US President Donald Trump announced that he has instructed US Trade Representative to consider slapping $100 billion in additional tariffs on Chinese goods.

On Wednesday, the Chinese Finance Ministry said Beijing would hit 106 American products, including soybean, automobiles, and chemicals, with a 25-percent tariff, worth $50 billion. USA officials say they'll hold hearings on the administration's proposed target list of 1,300 products in mid-May and haven't set a deadline for when the tariffs would take effect.

Amid widespread concern, and calls for restraint from USA businesses and farm states most vulnerable to Chinese retaliation, Trump said Friday the outcome would be worth the short-term risk.

If Trump uses his tariffs to force Chinese policy concessions rather than simply to posture, he could conceivably force China to reduce its systematic theft of USA intellectual property, to create a fairer, more level playing field for foreign companies, to reduce subsidies for its manufacturers, or to promise not to engage in currency manipulation.

USA businesses have been bracing for the impact of tariffs and have urged Trump to tread carefully with protectionist trade policies.

More broadly, the aggressive tariffs imposed by China indicated that it is not interested in negotiations for open trade and investment environment.

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The strength among treasuries also came following the release of a report from the Labor Department showing US job growth slowed by much more than anticipated in the month of March. In addition, if China continues to impose more tariffs on soybeans, for which the US and Brazil are major suppliers, Brazil would raise the prices as it is acquainted about the trade dispute between China and the U.S. The Chinese response was quick, coming less than 24 hours after the USA announcement.

The U.S. National Retail Federation accused Trump of "playing a game of chicken with the nation's economy". On Thursday evening, Trump requested tariffs on another $100 billion worth of Chinese goods, further fuelling the trade war.

Why is Trump issuing tariffs on China? The duties would mostly steer clear of the billions of dollars of consumer goods that the US imports from China, such as iPhones, toys, and shoes. U.S. President Donald Trump's tariffs on Chinese goods triggered another bout of market volatility.

"I'm not saying there's not going to be any pain", he told WABC radio in NY, but "we're going to be much stronger for it".

Mark Zandi, chief economist at Moody's Analytics, estimates that the tariffs threatened so far could slice US growth by just one or two-tenths of a percentage point this year. Leading the decline were airplane giant Boeing, which fell 3.1%, and heavy-equipment maker Caterpillar, which declined 3.5%. Tariffs of both the countries would not be imposed right now. China said it would "counterattack with great strength" if that happens. "We're not running a trade war", he told reporters. "This is the standard textbook for a trade war", says the NRF's French. Markets might be able to shrug off trade concern if there's a good jobs report this morning or an agreement on Nafta, he says.

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