European stocks fell on Wednesday with the Dow expected to follow, amid rising trade tensions between China and the U.S.
Investors reacted nervously to the news that China had responded to Washington’s detailing of proposed tariffs on 1,300 Chinese products at around 25 per cent.
China said it would place 25 per cent trade tariffs on 106 US goods. This is set to include soybeans, cars, air crafts and orange juice.
China remains the largest export market for US agriculture, particularly soy beans products, with around $14 billion of soy beans sold to China in 2017.
This could prove particularly detrimental to Donald Trump’s agricultural support base, with the U.S farm belt states such as Kansas and Kentucky traditionally voting Republican.
Similarly, soy beans remain an important import for the Chinese economy, commonly used to feed livestock across the country such as pigs and chicken.
The higher prices that may result from the retaliatory trade tariffs also remains an issue for China, allaying concerns that the tariff trade-off will escalate further.
The move has nevertheless prompted concern of a full-blown trade war between the two superpowers, causing global stocks to open lower.
The Dow Jones is expected to follow on from European markets, around 550 points lower.
Despite concerns, President Trump took to twitter to dispel speculation of a trade war.
We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!
— Donald J. Trump (@realDonaldTrump) April 4, 2018
Similarly, a spokesperson for the foreign ministry Geng Shaung said:
“Any attempt to bring China to its knees through threats and intimidation will never succeed,”
“There is no winner in a trade war, and an initiator will harm itself as well as others.”
Back in May of last year, the two countries signed a significant ten-point trade deal agreement after a series of negotiations.
However, US-China relations have been increasingly tense since Donald Trump took to twitter to label China a ‘currency manipulator’, signalling future trade bans.