NAB bank spokesman Ray Attrill says soothing comments from a White House economic adviser have calmed investors. (Reuters: Shannon Stapleton)
US President Donald Trump has said he has instructed US trade officials to consider $US100 billion ($130 billion) in additional tariffs on China, fuelling an already heated trade dispute between the world’s two biggest economies.
Mr Trump said the further tariffs were being considered “in light of China’s unfair retaliation” against earlier US trade actions that included $US50 billion ($65 billion) of tariffs on Chinese goods.
He added that the US Trade Representative had determined that China “has repeatedly engaged in practices to unfairly obtain America’s intellectual property”.
Mr Trump’s comments spurred a sharp sell-off in US equity futures markets.
The Standard & Poor’s 500 e-mini futures traded down 1.3 per cent, while similar moves were reflected in Dow and Nasdaq futures.
In currency markets, the US dollar fell against the Japanese yen, down 0.3 per cent to 107.06 yen.
Earlier this week, the Trump administration proposed 25 per cent tariffs on some 1,300 Chinese industrial and other products.
China shot back with a list of similar duties on American imports including soybeans, planes, cars, beef and chemicals.
The tit-for-tat tariffs have stirred fears that the two countries will spiral into a trade war that will crush global growth.
Republican politicians from Western and Midwestern states have voiced worries about a big hit to US farming exporters.
Abrupt turnaround after three-day market growth
Before Mr Trump’s statement about additional tariffs, the US share market rose for the third day in a row.
Markets at 8:30am (AEDT):
- ASX SPI 200 futures +0.3c, ASX 200 (Thursday’s close) +0.3pc at 5,789
- AUD: 77.85 US cents, 54.88 British pence, 62.78 Euro cents, 82.55 Japanese yen, $NZ1.056
- US: Dow Jones +1pc at 24,505, S&P 500 +0.7pc at 2,663, Nasdaq +0.5pc at 7,077
- Europe: FTSE +2.3pc at 7,200 DAX +2.9pc at 12,305, Euro Stoxx 50 +2.6pc at 3,026
- Commodities: Brent crude +0.7pc at $US68.50/barrel, iron ore -0.3pc at $US63.57/tonne, Spot Gold +0.1pc $US1327.53
This growth came after the White House indicated it was willing to negotiate with China over tariffs to avert the possibility of a trade war.
White House economic adviser Larry Kudlow said he expected Washington and Beijing to work out their differences over trade.
“Both countries have just proposed tariffs, there’s nothing enacted and I think that’s an important point,” he said.
National Australia Bank’s head of foreign exchange strategy Ray Attrill said Mr Kudlow’s interview had calmed investors.
“Soothing words from President [Donald] Trump’s [current] chief economic adviser Larry Kudlow have been a market factor,” he said.
“He’s been back on the media circuit talking tariffs saying, ‘It’s nothing around the corner, there’s going to be big discussion about it’.”
Yesterday US President Donald Trump tweeted that the country was not in a trade war with China.
@realdonaldtrump: 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 US.
Aircraft maker Boeing jumped nearly 3 per cent.
It lost ground on Wednesday after China retaliated against planned US tariffs on Chinese imports with $US50 billion worth of tariffs on North American products, including soybeans.
US China trade gap increased in February
However new data out overnight showed that the trade gap between the US and China increased in February.
The nearly $60 billion ($78 billion) US trade deficit with China is the biggest since the global financial crisis as demand for imports and exports rose.
Mr Attrill said the widening trade gap between the US and China could knock as much as 1 per cent off economic growth for the first few months of 2018.
“Anyone wanting to instead take a glass-half-empty view on how US trade policy evolves in coming month could do worse than look at the latest US trade figures,” he said.
“The deficit widened for the sixth consecutive month in February to $57.6 billion ($75.2 billion).
“Royalty payments of about a $1 billion ($1.3 billion) for television rights to the Winter Olympics were a factor, but do nothing to disguise the fact that the monthly trade deficits have widened out to $55-60 billion ($72-78 billion) per month from $40-45 billion ($52-59 billion) a year or so ago, mostly driven by the trend in imports which have outpaced rising exports.”
Trade war concerns easing in Europe
Despite the figures worries about a trade war also eased in Europe with markets making strong gains.
The DAX in Germany jumped nearly 3 per cent.
Oil prices were boosted by the optimism on global markets but spot gold eased back as the trade war fears dissipated.
The greenback also gained which saw the Australian dollar sold off overnight although it recovered lost ground this morning.
Tonight the US will find out about the latest employment numbers.
Westpac said the non-farm payrolls in the US are expected to increased by 185,000 in March with a fall in the unemployment rate to 4 per cent.
“Following February’s 313,000 jump, we are due for a softer month with 2017’s average increase 182,000,” Westpac economists said.