HONG KONG: Asian markets recouped some of their early losses in volatile trade on Tuesday (Mar 4) after China announced fresh tariffs on US imports in retaliation to President Donald Trump’s latest levies.
China said it would impose levies of 10 and 15 per cent on a range of US agricultural imports in response to Trump’s tariffs.
The US president signed an executive order to increase a previously imposed 10 per cent tariff on Chinese goods to 20 per cent, the White House said on Monday.
US tariffs also came into effect on imports from major trading partners Canada and Mexico after a deadline to avert the levies passed without a deal being struck.
Canada said it would respond in kind, with 25 per cent tariffs on US$155 billion worth of American goods taking effect after the deadline.
Fears of a full-blown trade war increased volatility in markets across Asia.
Tokyo and Hong Kong recovered some of their losses after China announced its retaliatory tariffs.
The Nikkei was down 1.2 per cent, while the Hang Seng rose by 0.5 per cent.
Shanghai, Bangkok and Manila were also slightly up, while Sydney, Wellington, Taipei, Jakarta, Kuala Lumpur and Seoul were down.
Japanese automakers with Mexican factories in their supply chains also suffered, with Nissan, Toyota and Honda among the major losers.
“The spectre of a full-blown trade war is once again looming, threatening to choke global economic growth just as investors were starting to regain confidence,” said Stephen Innes of SPI Asset Management.
Investors are hoping that China will announce a huge economic stimulus package at its key parliamentary meeting, the National People’s Congress, on Wednesday.
“In the upcoming National People’s Congress, Chinese policymakers could provide more pro-growth measures including announcing a larger budget deficit target and maintaining a five percent growth target for this year,” said MUFG Bank’s Lloyd Chan.
Both the Mexican peso and Canadian dollar have dropped against the greenback over the past few days.
Trump expressed outrage on Monday over the weakening of certain currencies, accusing Beijing and Tokyo of using it as a trade strategy, although the Japanese government fiercely refuted the claim.
The oil market also saw sharp declines, with West Texas Intermediate crude falling to US$67.99 per barrel and Brent crude dropping to US$71.05 per barrel at around 0700 GMT.
Bitcoin’s price plunged nearly 10 per cent on Monday as concerns of an escalating trade war pushed investors to seek safer investments.
Bitcoin and similar digital assets had surged at the weekend after Trump suggested creating a national cryptocurrency reserve.
“Everything is getting sold,” Forexlive manager Adam Button said. “There’s a de-risking that’s unfolding” among crypto investors, he said.
