Stocks stumble as Trump moves toward an all-out trade war with China


On Monday, Trump said China's tit-for-tat tariff response illustrated the country's unwillingness to change its "unfair practices".

"If the U.S. side becomes irrational and issues the list, China will have to adopt measures that are comprehensive measures in quantity and quality in order to make strong countermeasures".

It gave no details.

China has threatened "comprehensive measures" in response to U.S. President Donald Trump's new tariff hike, raising the possibility Beijing might target operations of American companies. It also scrapped agreements to narrow China's trade surplus with the United States by purchasing more American farm goods, natural gas and other products.

In early trading, stocks in France, Germany and the United Kingdom also fell, while Asian markets also declined. As of 8:25 p.m. ET, S&P 500 futures were down just over 0.5% and Nasdaq futures were off just over 0.65%.

Trump said he hopes to cut the trade deficit with the increased tariffs.

Derek Scissors, a China scholar at the American Enterprise Institute, a Washington think tank, said that means China will soon run out of imports of U.S. goods on which to impose retaliatory tariffs.

Michael Wilson, Morgan Stanley's Chief U.S. Equity Strategist, says the White House could be encouraged by Chinese stocks falling.

Trump said if China increases its tariffs again in response to the latest U.S. move, "we will meet that action by pursuing additional tariffs on another $200 billion of goods".

Stock markets across the region fell Tuesday, with Shanghai closing down 3.78 percent, its biggest drop in two years, and Shenzhen down 5.31 percent. Trump said at the time he would impose even more duties if China retaliated, which the Asian nation immediately said it would do.

Economists warn Washington might be undercutting its negotiating position by alienating potential allies.

"I don't think we'll be caught out by anything in the United States - our export profile to the USA is quite different".

"I understand that there's going to be concern about what the impact might be, both on the financial markets and on the global economy", he said.

Earlier this month, the Trump administration gave ZTE a reprieve after the company agree to pay fines, change management and agree to American oversight. That means things like tourism and education, industries from which the United States benefits a lot more than China does.

"The United States has initiated a trade war that violates market laws and is not in accordance with current global development trends", it added. None of the tariffs could take effect for 60 days.

In turn, China says their new import taxes are in response to an earlier set of tariffs by the U.S., also of $34 billion at a 25 percent rate. The administration has identified $200 billion in Chinese exports it plans to add tariffs to, on top of the original $50 billion in products it first chose to go after.

"President Donald Trump has raised the stakes once more".

Gary Cohn, Trump's former top economic adviser, said last week that a "tariff battle" could result in price inflation and consumer debt - "historic ingredients for an economic slowdown".