The Dow Jones Industrial Average fell by almost 600 points this Monday morning as trade tensions increased between China and the US after the Chinese government said it would raise its tariffs beginning June 1, 2019 on $60 billion worth of US goods.
Over the past few weeks, markets worldwide have shown a mercurial unpredictability as the US’s three major indices saw sell-offs being extended as investors’s critically analyzed whether trade negotiations between China and the US would take months to resolve. Last week’s S&P fell by more than 3.5 percent which was the worst for that index this year and the Dow Jones saw its biggest slide downward since March.
President Trump made a threat earlier in the year to raise tariffs on $200 billion of Chinese imports which he did implement last week causing this week’s retaliation by the Chinese finance ministry. All 5,700 categories of Chinese goods headed for the US are scheduled to be charged a 25 percent tariff which is up from the former 10 percent tariff beginning at 12:01 a.m. last Friday.
China and the Trump administration met last week in Washington for high level trade talks but were unable to reach an agreement. Following the failed talks, Trump tweeted on Twitter this weekend challenging the Chinese trade deal entourage saying that if China didn’t make a deal China would be hurt badly because companies would be forced to leave China eventually for other countries. Trump also said in his tweet that things were too expensive to buy in China and that they backed out of a great deal.
Trump also tweeted that he loved collecting big tariffs and that it would be even worse when China came to the trade negotiating table in his second term.
China, in previous retaliation to earlier tariff hikes by the US already raised tariffs on $110 billion worth of US imports.
China imports around $130 billion in US good while the US imports $500 billion of Chinese goods. This imbalance in trade has caused regulators to target US companies in China by slowing down customs clearance for their goods and increasing regulatory inspections that could slowdown their operations.
On a worldwide scale, businesses, investors and policymakers have been impacted by this decline in trade relations between the US and China and all are concerned about the negative impact on an already sluggish global economy.