Asian stocks wobbled on Friday, as Washington slapped tariffs on Chinese imports, a move many investors fear could be the start of a full-scale trade war between the world’s two largest economies.
The US tariffs on more than 800 goods from China worth $34 billion took effect at 4am. President Donald Trump has warned the United States may ultimately target over $500 billion worth of Chinese goods, an amount that roughly matches its total imports from China last year.
China's commerce ministry said shortly after the US tariffs took effect that it was forced to retaliate, meaning $34 billion worth of imported US goods including autos and agricultural products are also subject to 25 per cent tariffs. MSCI's broadest index of Asia-Pacific shares outside Japan was 0.1 per cent lower, pulling back from a modest early rise. The index has lost near 9 per cent since June 7th. The Shanghai Composite index ended morning trade down 0.3 percent, before the tariffs took effect, and trading will resume at 5am.
Earlier on Friday, the index fell as much as 1.6 per cent to 2,691, getting close to its January 2016 low of 2,638. "China will surely take retaliatory steps, to which U.S. President Donald Trump has threatened more tariffs," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. A trade war "now has become a reality," he said. "If this was a boxing match, the first round has just begun. It is going to be a long process. Trump is unlikely to back down easily ahead of the US mid-term elections (in November), especially given the recent rise in his popularity," Fujito said.
Seoul's Kospi index, down in the morning, was flat fell 0.25 per cent and shares in Taiwan were 0.e percent lower. Shares of Singapore, a major trading hub for the region, dropped more than 2.0 percent to 14-month lows.
Japan's Nikkei stock index rose 1.1 per cent from Thursday's three-month low, helped in part by a boost in automaker shares on signs Washington and the European Union may be seeking a compromise on tariffs on cars.
"How that's going to iron out, I think that's still going to be a major point of contention. But at least they're talking and I think while cooler heads prevail, that's the positivity that's emanated from the markets,? said Stephen Innes, head of trading APAC at OANDA.
