Earlier today, China announced tariff hikes on $75 billion worth of U.S. products as a retaliatory measure against President Trump’s latest tariff message. China has decided to apply tariffs ranging from 5% to 10% on the $75 billion worth of products in two rounds. The first round of tariffs will take effect on September 1, while the second round will commence on December 15. The state council released a statement saying, “In response to the measures by the U.S., China was forced to take countermeasures. The Chinese hopes that the U.S. will continue to follow the consensus of the Osaka meeting, return to the correct track of consultation and resolve differences, and work hard with China to end the goal of ending economic and trade frictions.” The stock market and bond yields fell sharply this morning following the announcement.
Last week, there was talk of oil trading lower over the continued fears of a global economic slowdown, and the global market is once again trading lower after reacting to the news. Exporters on both sides of the table are hoping that positive news will come from the Group of 7 (G7) summit in France later this week; however, there are still major concerns that neither side will compromise and reach a settlement. According to Joe McDonald of the Post-Gazette, “talks are deadlocked over how to enforce any deal. China insists Trump’s punitive tariffs have to be lifted as soon as an agreement takes effect. Washington says at least some have to stay to ensure Beijing carries out any promises it makes.”
President Trump is expected to respond to the new round of tariffs this afternoon, and this will shed some light on what direction the negotiations, or lack thereof, are heading. Global markets are closely watching the rhetoric from the world’s two largest economic powerhouses to see if either side is willing to budge.