Market calms until trading day, but the United States – China threat is imminent
After three days of massive sales, the world market won a probation on Tuesday, which cuts the stock value by trillions of dollars from the value of the stock as China vows to “fight” against the additional tariffs imposed by Beijing.
But emotions remain vulnerable less than a week since U.S. President Donald Trump released a full-scale tariff that put the world market into the tail.
VIX stock's volatility index (often called Wall Street's fear scale) is still around 44 points – although Monday's peak was just over 60.
On Monday, the U.S. fiscal 10-year U.S. fiscal yields released its biggest one-day growth in the year, which was stable. Analysts say many reasons may explain the sharp rise in U.S. bond yields on Monday, including investors selling their most liquid assets to make up for falls elsewhere.
The dollar, which was beaten from the tariff turmoil, remains weak to other major currencies. Safe haven currencies, including the Japanese yen and Swiss franc, were held at a six-month high and began on Tuesday.
Japan's Blue Chip Nickel Stock Index was 6% higher, while in London's 14-month lows and markets, shares in Paris and Frankfurt rose more than 1%.
“Sentences are rebounding, perhaps because Trump may focus protectionism on China and speed up trade deals elsewhere,” said Francesco Pesole, a ING currency strategist. “Nevertheless, the market may be wrong on the optimistic side.”
“The Battle of Will” Shaping: Analysts
After the country's sovereign wealth funds intervened in buying stocks, China's market was only modest. The benchmark of Chip exporters who happen to rely on Taiwan fell by 5%, its worst record.
In the offshore market, the Chinese yuan fell to 7.3677 per dollar, the weakest in two months, and then rebounded slightly better than 7.3393 at the close of Monday.
China is attacking the United States because it has suffered damages by imposing a 34% reciprocal tariff on imports and restrictions on key rare minerals. In response, U.S. President Donald Trump threatened to impose an additional 50% tariff if China fails to withdraw its measures. Andrew Chang explains the escalation of the trade war between the world’s two largest economies and the potential impact of China’s retaliation.
Trump dug China on his heels, imposing a 50% tax if Beijing does not withdraw its 34% retaliatory tariff announced by the U.S. last week. If Trump sticks to his plan, the new U.S. responsibilities for Chinese goods could rise to 104% this year by Wednesday.
Trump imposed less extensive tariffs on China during his first term as president, some of which his successor, Joe Biden, insisted.
However, Beijing is under pressure to respond due to dangerous global supply chains.
“Beyond the mistake, the U.S. threat of escalating tariffs on China is a mistake, again exposing the nature of the U.S. side's blackmail,” the Chinese Ministry of Commerce said in a statement.
“If the United States insists on working hard, China will fight to the end.”
Front burner24:56Trump's global market collapses, explains
Trump’s affinity for tariffs has the potential to derail China’s largely export-led economic recovery, as no other country is close to the U.S. consumption capacity, where Chinese producers sell more than $400 billion in goods each year.
“If tariffs keep rising, it will become a battle of wills and principles, not economics,” said the Senior Chinese Economist in the Intelligence Department of the Economist.
Trump's tariffs will be particularly sharp because they target Chinese exporters to shackle the trade war's two main strategies: transfer some production abroad and push sales to non-U.S. markets.
Chinese President Xi Jinping is scheduled to visit Malaysia, Vietnam and Cambodia this month, three economies relocated from Chinese manufacturers to avoid U.S. sanctions during Trump's first term, but is now facing its own huge expropriation.
EU prepares for response to imminent taxation
European Commission President Ursula von der Leyen called on Beijing in a call with Chinese Prime Minister Li Qiang to ensure a negotiated solution and stressed the need to support a fair trading system built on a level playing field
The European Commission said on Monday it proposed a “zero-zero” tariff agreement to avoid a trade war with the United States. Reuters shows that the committee proposed a 25% anti-propaganda campaign for a wide range of commodities including soybeans, nuts and sausages, although other potential items, such as bourbon, were excluded from the list.
