Global economy suffers turbulence as US-China trade war escalates

May 15, 2019, 08:35 am

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The US Trade Representative (USTR) announced on Monday that it would extend 25% tariff to more than 3,800 goods China exports to the US, worth about 300 billion dollars. The image shows containers and vessel at the Port of Long Beach in California./ Source: Long Beach UPI=Yonhap News

By AsiaToday Washington correspondent Ha Man-joo & reporter Sung Yoo-min

The trade war between the US and China is threatening to destabilize the world economy following a rapid deterioration in high-level trade negotiations held from May 9-10 in Washington DC. With their retaliatory tariffs, the world’s two largest economies are casting a shadow on the global economy. Global stock markets plunged sharply and US$1 trillion was wiped out of global markets, while investors fled to safe-play assets, such as gold and US Treasuries, worsening confusion.

The US Trade Representative (USTR) listed Monday $325 billion more of Chinese goods for possible tariff hikes a few hours after China announced it would impose tariffs ranging from 5 to 25% on 5,140 U.S. products worth about $60 billion starting on June 1 in response to the U.S. move last Friday to impose punitive duties on $200 billion worth of Chinese-origin imports. US President Donald Trump and his Chinese counterpart Xi Jinping agreed to halt new trade tariffs at a post-G20 summit meeting in Buenos Aires last December. However, the truce is now over and the trade war is deepening with new retaliatory tariffs.

The worsening trade dispute has constricted the global economy, mainly the financial markets. On Tuesday, Japan’s Nikkei 225 closed lower by 0.59% at 21,067.23, barely maintaining the 21,000 level. China’s Shanghai Composite Index dropped 0.69% to 2,883.61 at closing bell. The Korean stock market opened sharply lower, but closed higher.

The Dow Jones Industrial Average lost 617.38 points Monday, or 2.38%, to close at 25,324.99 and the S&P 500 also dropped 69.53 points, or 2.41%, to 2811.87, the worst session for those indexes since Jan. 3. The tech-heavy Nasdaq composite index sank 269.92 points, or 3.41%, to 7,642.02, its worst decline since Dec. 4, 2018. European stock markets dropped as well.

The South China Morning Post (SCMP) said the escalating US-China trade war wiped out nearly US$1 trillion of stock market value, led by losses in the tech sector, after China announced it would impose tariffs on American goods. On the other hand, investors fled to relatively safer assets, such as gold and US Treasuries. June-dated gold enjoyed a $14.40, or 1.1%, to settle at $1,301.80 an ounce Monday. The 10-year U.S. Treasuries yield slipped 3.1 basis points to 2.424%. Bond prices move inversely to yields.

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