Wall Street sinks as China retaliates on tariffs
Wall Street was in the red in late trading as China delivered on its promise of retaliatory tariffs.
On Friday, the Trump administration imposed a 25% tariff on a wide range of Chinese products (659 in total), worth around $US50 billion in annual trade.
On Saturday, China matched that amount, announcing it would impose tariffs on $US34b worth of US imports from July 6, with $US16b more to follow at an unspecified time.
China is targeting US coal, crude oil, cars and agricultural exports. Some analysts see a strategic move to target goods in marginal US states that are home to President Donald Trump's base.
Mr Trump has previously said that, if China retaliated, he would impose tariffs on a further $US100b in goods. Earlier today, he said the US would impose further tariffs, but did not specify an amount.
Unconfirmed rumours hold that the president will target China's US tech sector, where network hardware maker Huawei has already been blocked from deals for alleged security concerns. However, the intertwined nature of many US and Chinese tech companies in global supply chains could make such an initiative difficult to implement.
With Congressional elections in November, and the Republican majorities in the House of Representatives and Senate potentially at risk, Mr Trump has to walk a fine line between bolstering his get-tough/can-do image and provoking escalated tit-for-tat tariffs that could damage the US economy or alienate free-traders in his own party.
China's leadership faces no such worries about short-term electoral challenges, so could be better-placed to dig-in for an extended trade war.
RELATED VIDEO: Stephen Jacobi tells Susan Wood that a China-US trade war will hurt NZ (March 23).
The tariffs imposed on China follow US moves to slap a 25% tariff on steel, and a 10% tariff on aluminium, hitting Canada, Mexico and the EU, among others.
Earlier, trade expert Stephen Jacobi told NBR that while New Zealand has few exports in the areas targeted by Mr Trump for tariffs (New Zealand's steel and aluminium exports to the US last year totalled $60m), there could be a substantial indirect cost.
Mr Jacobi says that as a small, trade-dependent nation, New Zealand depends on the rules-based system overseen by the World Trade Organisation.
China and US moves to impose unilateral sanctions undermine and destabilise the WTO, he says.