The U.S.-China saga continues!
After U.S. President Donald Trump said it would increase tariffs on 200$ billion worth of Chinese goods, the world’s second-largest economy fired back! Beijing decided to increase tariffs on U.S. goods, which largely include a broad range of agricultural products. The move negatively impacted major Asian shares.
On Tuesday afternoon, the Shanghai Composite saw its shares dipping by 0.36%, while the Shenzhen component suffered a 0.46% decrease. The Shenzhen composite lost 0.490%. Chinese tech giant Tencent’s shares fell over 2%, pushing the Hong Kong’s Hang Seng index 1.58% lower.
Meanwhile, in Japan, the Nikkei 225 declined 0.78% as Japanese conglomerate SoftBank Group lost more than 5%.
China’s increased tariffs on U.S. goods worth $60 billion will take effect on June 1. Beijing’s decision was in response to Trump’s threat that it would increase tariffs from 10% to 25%. Trump made the comments on Twitter, sending a wave of fear around the global financial market. Prior to this, several reports revealed that the two influential countries could strike a deal soon.
Why did the talks break down?
When asked about when a breakthrough in talks with China could be announced, Trump said, according to NBC News, “we’ll let you know in three or four weeks if it’s successful”.
In a note by Barclays’ analysts, they said, “we believe the talks broke down due largely to what we perceive as irreconcilable differences between US security concerns about China’s industrial policy and China’s dedication to these policies as means to avoid the ‘middle income trap’.
They added, “in our new baseline scenario, we assume that the US places tariffs on most, if not all, imports from China over time and China responds with measures of its own, though not in proportion. We estimate direct net economic losses to the US at 0.2-0.3% of GDP over the long run”.